K-Electric Limited (KE), the sole power utility in Karachi, has entered into a Power Purchase Agency Agreement (PPAA) and Tariff Differential Subsidy Agreement (TDSA) with the federal government, through its representative bodies.

The listed company, engaged in the generation, transmission and distribution of electricity, shared the development in its notice to the Pakistan Stock Exchange (PSX) on Friday.

“These agreements, along with Interconnection Agreement (ICA), have been approved by the Economic Coordination Committee (ECC) and ratified by the Federal Cabinet,” the company said in a statement.

KE shared that the ICA will be signed once approval is received from the National Electric Power Regulatory Authority (NEPRA).

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It said that the PPAA has been executed for a 10-year term. “This agreement will regularize the existing arrangement for the supply of power to KE from the national grid,” read the statement.

“Further, with the signing of ICA for the same term, and in the backdrop of planned investments of KE in network interconnection capacity, KE will be able to off-take supply upto the interconnection capacity from the national grid, including 1,000 MW of power supply on firm basis,” said the company.

Moreover, KE said that the TDSA has also been executed for a 10-year term, which shall help streamline the company’s process of filing, verification and release of its Tariff Differential Subsidy Claims from the government.

“In addition to the above agreements, a Mediation Agreement has also been executed between KE and government parties for settlement of disputes around historic receivables and payables,” it said.

Moonis Alvi, chief executive officer (CEO) KE, termed the development as a “landmark day for Karachi”.

“Today is a landmark day for Karachi, as we sign agreements with the Government of Pakistan (GoP) to secure firm electricity supply to Karachi up to interconnection capacity,” Alvi said in a message on social media platform X.

“This is a huge stride in addressing the energy trilemma for customers, also reducing subsidy burden on the government,” he said.

“Through these agreements, KE will be able to provide 1,000-2,000MW of uninterrupted electricity to Karachi,” said Moonis Alvi, in a separate video message.

“The agreement was crucial to continued supply uninterrupted electricity to the metropolis. Moreover, the other agreements will help improve the company’s ties with the government, and would allow KE to implement its investment plan,” he added.

As per sources, approximately Rs4,007 billion is receivable from KE as on October 31, 2023, pending due to a subsidy dispute between the power utility company and the Government of Pakistan.