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.