The Pakistani government has temporarily halted payments to 18 Independent Power Producers (IPPs), collectively generating 4,267 MW, in preparation for upcoming negotiations aimed at altering their power purchase agreements (PPAs) from a “take-or-pay” model to a “take-and-pay” system. This suspension is intended to be temporary, lasting until the full implementation of the Competitive Trading Bilateral Contract Market (CTBCM) within the next two years.
The IPPs impacted by this move, which were established under the power generation policies of 1994 and 2002, are being targeted for contract renegotiations. While the government has not officially provided an explanation for the payment suspension, sources suggest it may be related to clearing outstanding dues with Chinese IPPs ahead of the visit by Chinese Premier Li Qiang, as well as finalizing payments to five IPPs whose contracts were prematurely terminated. Some insiders claim the payment freeze is a short-term measure, though no official reason has been given.
Previously, the government committed to the International Monetary Fund (IMF) to finalize a policy framework by September 2024 (a deadline that has since passed) to transition to a new wholesale electricity market. The goal of this market is to enhance distribution efficiency and provide incentives for better management of distribution companies (Discos).
The transition will be phased to mitigate its impact on consumers and the government budget. The government also plans to reduce capacity payments and settle arrears, possibly by renegotiating PPAs and extending the duration of loans from banks.
The list of affected IPPs and their capacities includes: Uch-I Power Limited (586 MW), Pakgen Power Limited (365 MW), Liberty Power Daharki Ltd (235 MW), Kohinoor Energy (131 MW), Fauji Kabirwala Power Company Limited (157 MW), Attock Gen Limited (165 MW), Engro Power Gen QadirPur Limited (227 MW), Foundation Power (Daharki) (185 MW), Halmore Power Generation Company (225 MW), Liberty Power Tech Limited (200 MW), Hubco Narowal Energy Tech Limited (220 MW), Nishat Chunian Power Limited (200 MW), Nishat Power Limited (200 MW), Orient Power Company (229 MW), Saif Power Limited (229 MW), Sapphire Power Limited (225 MW), New Bong Hydel IPP (84 MW), and Uch-II Power Project (404 MW).
Several of these IPPs have expressed a willingness to renegotiate their contracts, with some leaders acknowledging the need for addressing the power sector’s challenges and reaching a mutually beneficial agreement. At least one CEO has publicly confirmed their agreement to revise the contract terms.
Follow us on our social media platforms here: Twitter WHATSAPP CHANNEL FACEBOOK PAGE
Comments are closed, but trackbacks and pingbacks are open.