ISLAMABAD: Prime Minister Shehbaz Sharif revealed that five independent power producers (IPPs) have voluntarily agreed to terminate their power purchase agreements (PPAs) with the federal government, resulting in an annual saving of Rs60 billion for consumers. The announcement follows extensive negotiations between the IPPs and the government, with the prime minister praising the companies for prioritising national interest over their own.
During a federal cabinet meeting on October 9, 2024, PM Shehbaz highlighted the significant relief these cancellations will bring to citizens, particularly in the face of soaring inflation and unsustainable electricity costs. “The take-and-pay system for these IPPs has ended, offering much-needed financial relief,” he stated, adding that this is just the first phase of a broader effort to renegotiate deals with other IPPs.
The premier further noted that the revision of PPAs with additional IPPs is expected to save the national exchequer Rs411 billion annually, a vital step for a country struggling with fiscal challenges.
The five IPPs involved in the voluntary termination include Hubco, Lalpir, Saba Power, Rousch Power, and Atlas Power. PM Shehbaz commended their decision, calling them “the first raindrops” in the government’s effort to address the nation’s energy crisis.
An official from the government’s task force on the power sector confirmed that discussions are ongoing to finalise the termination agreements, with all five companies expected to sign the necessary documents soon.
This move comes after the government warned last month of severe consequences if the IPPs did not voluntarily terminate their PPAs. The PM also acknowledged the role of the task force and federal cabinet members in facilitating this achievement.
In a related development, Hub Power Company Ltd (Hubco), the nation’s largest private utility, announced the premature termination of its contract with the government for power generation. The company disclosed that its board approved an accelerated expiry date of October 1, 2024, well ahead of the initial March 2027 deadline, citing national interest as the primary motivation.
The government’s renegotiation efforts stem from earlier agreements made a decade ago, which resulted in guaranteed returns and capacity payments for IPPs, even when power was unused. These arrangements have contributed to higher electricity costs, which have sparked protests across the country.
The restructuring of power sector agreements has been a key issue in Pakistan’s ongoing talks with the International Monetary Fund (IMF), as part of a broader $7-billion bailout package. Negotiations with China on restructuring Pakistan’s power sector debt are also underway, albeit with slow progress.
