Listed Independent power producers (IPPs) in Pakistan are witnessing sharp declines in stock prices. Shares have fallen by 13% to 26% in three weeks, with Hub Power Company (HUBC) dropping 29%.
This follows the government’s plan to prematurely terminate power purchase agreements (PPAs) to reduce energy costs. The move aims to save Rs0.6 per kWh by cutting future capacity payments.
As per reports, other IPPs, including Lalpir Power (LPL), Nishat Chunian Power (NCPL), and Nishat Power (NPL), also saw their shares drop as the government plans to renegotiate or end their PPAs. The government approved a settlement of power deals with five power producers, including HUBC and LPL, to address rising energy costs.
For HUBC, the base power plant termination could impact future earnings. The plant contributed Rs19 per share in FY24, and the termination is likely to reduce earnings for FY25 through FY27. Topline Research estimates this could lead to Rs35-37 per share in lost cash flows. HUBC’s share price has already fallen from Rs146 in September to Rs112 in October.
The government is also considering converting imported coal plants to local fuel and extending debt repayment terms for CPEC-related IPPs. Additionally, it plans to move several IPPs to take-and-pay agreements to avoid paying for unused capacity. Other steps include renegotiating wind power agreements and adjusting the equity return rates for IPPs under the 2002 policy.
These changes, aimed at lowering Pakistan’s overall energy costs, are expected to save billions.
