Government expands power sector privatisation drive, includes additional plants

The government has decided to include the Jamshoro Power Plant and two liquefied natural gas (LNG)-fired power plants in its privatisation programme, which had previously been delayed due to various challenges, The Express Tribune reported.  

This move is part of the broader privatisation effort involving 10 power distribution companies (DISCOs), aimed at addressing inefficiencies within the power sector, which continues to receive significant subsidies.

The announcement was made by Muhammad Ali, Adviser to the Prime Minister on Privatisation, during a consultative session. He noted that the country’s power sector is receiving about Rs1.2 trillion annually in subsidies to offset losses, due to factors such as inefficiency, low recoveries, and widespread electricity theft. He warned that without the privatisation of distribution companies, the country’s economic stability could be at risk.

The government has engaged Alvarez & Marsal as a financial adviser for the privatisation of three key distribution companies—Lahore Electric Supply Company (LESCO), Faisalabad Electric Supply Company (FESCO), and Gujranwala Electric Power Company (GEPCO). 

The process is moving forward with the finalisation of transaction structures and plans to issue the first Expression of Interest (EoI) for prospective investors in the coming weeks.

While the privatisation of the power sector remains crucial to reducing financial burdens, challenges persist, with the government yet to complete any significant privatisation through competitive bidding. The most recent sale, the First Women Bank, was concluded under a negotiated sale agreement with a UAE-based firm. The privatisation process for the DISCOs is expected to continue in phases, with ongoing discussions and required actions to meet the World Bank's recommendations.