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Govt approves termination of existing Power Purchase Agreement with five IPPs

  • Details of agreement between Task Force and IPP owners were presented to the Cabinet, listing HUBCO, Lalpir Power Limited, Saba Power, Rousch Power, and Atlas Power among the IPPs whose current agreements will be terminated
Published October 10, 2024

In a major development towards implementing reforms in Pakistan’s ailing power sector, the Federal Cabinet approved the termination of existing Power Purchase Agreements with five Independent Power Producers (IPPs), as recommended by the Task Force on Power Sector Reforms.

As per a statement released by the Prime Minister’s Office (PMO) on Thursday, details of the agreement between the Task Force and the IPP owners were presented to the Cabinet, listing HUBCO, Lalpir Power Limited, Saba Power, Rousch Power, and Atlas Power among the IPPs whose agreements will be terminated.

Rousch Power was established under a Build-Operate-Transfer (BOT) agreement, and after the transfer of ownership to the government, its privatisation will be conducted through the Privatization Commission, read the statement.

Govt set to announce revised deals with IPPs

Meanwhile, ownership of the remaining four IPPs will remain with their respective owners, with no payments from the government after the termination of these agreements, read the PMO statement.

“By the grace of Allah, the national economy is swiftly moving towards stability,” the Prime Minister was quoted as saying in the statement.

“In the first phase, we are ending Power Purchase Agreements with five IPPs.”

Further revisions of agreements with other IPPs in the power sector will gradually reduce tariffs, the Prime Minister said.

This move will benefit electricity consumers to the tune of Rs60 billion annually, reducing per-unit electricity costs, and saving the national treasury Rs411 billion overall.

Hubco and Lalpir Power’s share price plummeted during intra-day trading. At the time of this report, Hubco’s share was trading at Rs112.5, down Rs0.92, from a high of Rs119.4 during the day. Lalpir’s stock was down Rs0.64, and hovering at Rs15.8 from a high of Rs17.15 earlier.

Business Recorder had reported this week that the federal government’s work on different IPPs has started delivering results as four IPPs, M/s Atlas Power, M/s Saba Power, M/s Rousch Power and Lalpir Power have initialled (signed) premature scrapping of pacts whereas Hubco is likely to follow suit on Tuesday or Wednesday.

Hubco earlier on Thursday also informed its stakeholders that the company reached a ‘negotiated settlement’ with the government for early termination of power agreements.

Meanwhile, the PM said that five IPP owners prioritised national interest over personal gains and voluntarily agreed to terminate these agreements with the government.

“These five IPPs have played a key role in initiating public relief, like the first drop of rain,” the PM acknowledged.

“I, along with the entire cabinet, am grateful to these IPP owners,” he said, while lauding the role of Task Force on Power Sector Reforms and the Federal Cabinet members.

Comments

200 characters
Mumtaz Malik Oct 10, 2024 03:39pm
Nishat Group is one of the leading companies in Pakistan and a significant taxpayer. We hope that, for the well-being and prosperity of the nation,
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Mumtaz Malik Oct 10, 2024 03:39pm
The employees of Lalpir Power Limited will not face hardships as a result of this agreement. We wish the best for Lalpir Limited and for Pakistan as a whole.
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Kashif A Mandvia Oct 10, 2024 05:28pm
Great Job
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KU Oct 10, 2024 05:36pm
What say the visionaries about dams/reservoirs for electricity n increasingly scarce water for agriculture? Solar panels may be affordable but solar equipment is still under duty/tax.
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M. R. Kayani Oct 10, 2024 06:23pm
This decision marks a crucial step in addressing long-standing inefficiencies in Pakistan's power sector. By terminating outdated Power Purchase Agreements with the Independent Power Producers, the government is signaling its commitment to reforming the energy landscape, improving transparency, and reducing the financial burden on the national economy. Moving forward, it's essential that these reforms pave the way for more sustainable, cost-effective, and reliable energy solutions for the country.
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Mekal Faruki Oct 10, 2024 09:48pm
I believe the author misspoke. He stated the four IPPs prioritised National Interest over Private Gain! Where the exact opposite is the basis for the action
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Faiz Jalib Oct 11, 2024 12:28am
Well, is the settlement be going to made public? Or half a decade later we'll be cursing previous governments for poor contracts?
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Salim Oct 11, 2024 06:36am
@Mumtaz Malik, employees will lose their jobs. Mark my words.
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Salim Oct 11, 2024 06:39am
IPP owners are bunch of looters. They don't care about national interest. IPPs are still a burden. They even do not maintain outdated plants and charge money to CPPAG.
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Jinsar Ali Shaikh Oct 11, 2024 07:53am
Very good action in the interest of public and to improve the economical conditions of the beloved country
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Sharif Oct 11, 2024 02:26pm
Terms of settlement with IPPsremain to be known
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monalisa Oct 12, 2024 07:53pm
the govt is misleading the people of Pakistan. these 5 IPPs contract were already due for termination as per contract. these 5 IPPs were not producing any electricity yet were paid till termination
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Mir Adnan Yakub Oct 12, 2024 11:46pm
IPP's agreements should be disclosed to General Public., otherwise agreement may be challenged in the courts. Compare DAM construction cost for cheaper electric generation for poor nation.
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Faraz Oct 13, 2024 04:08pm
Too little too late.
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Syed Oct 13, 2024 05:14pm
We don't know the other side of actual agreement. It should be published what are the actual terms and conditions. The IPPs owners are not so simple.
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Mumtaz Malik Oct 18, 2024 11:20am
I have served with leading groups such as The Legend Group and Nishat Group. These families and their organizations have always stepped forward to make sacrifices,
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Mumtaz Malik Oct 18, 2024 11:21am
Not just for Pakistan, but for the nation as a whole. I hope that the employees of the Nishat Group will find suitable positions in other institutions,
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Mumtaz Malik Oct 18, 2024 11:21am
I hope that the employees of the Nishat Group will find suitable positions in other institutions, and I sincerely pray for their continued success and good fortune.
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