Four Independent Power Producers (IPPs) including Atlas Power, Saba Power, Rousch Power and Lalpir Power have initiated the early termination of deals with the federal government whereas the Hub Power Company Limited (Hubco) is also expected to finalise its agreement in the coming days, Business Recorder reported this, citing well-informed sources.
Despite some resistance from Hubco, Rousch Power, and Lalpir Power, which initially opposed the termination of Power Purchase Agreements (PPAs), all eventually agreed, although Hubco has unresolved disputes with the government over Rs1 billion in payments.
The government estimates that these renegotiations will save Rs325 billion over the remaining 3 to 10 years of the contracts’ life span, with a potential reduction of Rs0.65 per unit in electricity costs.
The Task Force on Power Sector, comprising security officials, lawyers, and experts from SECP, PPIB, CPPA-G, and Nepra, played a critical role in convincing IPPs established under pre-1994, 1994, and 2002 power generation policies to renegotiate their contracts.
Power Minister Sardar Awais Khan Leghari stated that consumers could see up to Rs7 per unit reduction in tariffs through a combination of these renegotiations, debt re-profiling, and a moratorium on debt payments to Chinese IPPs under CPEC.
The reduction of the Return on Equity (RoE) in public sector power projects and negotiations with 2006 policy power projects are also expected to contribute to lower tariffs.
Currently, capacity payments account for Rs19-20 per unit, over 50% of the total electricity cost, excluding taxes and surcharges. Discussions are underway to revise tariffs for wind power projects as well.
Some IPPs expressed dissatisfaction with the pressure applied during the negotiations, citing junior officials from SECP, CPPA-G, and Nepra as part of the discussion process. Key concerns remain over the excessive capacity payments for power plants in both the public and private sectors, with no clear reform plan in sight.
Several power plant owners, including Attock Gen, Liberty Dharki, and Gul Ahmad, have already announced tariff reductions, while others are evaluating potential changes following discussions with top officials.
