Five IPPs voluntarily terminating contracts with govt, says PM Shehbaz
After detailed deliberations with the authorities, the five independent power producers (IPPs) have agreed to cancel their power purchase agreements (PPAs) with the federal government “voluntarily”, Prime Minister Shehbaz Sharif said on Thursday, which will provide consumers with a relief of Rs60bn ($216.10 million) annually.
“By voluntarily agreeing to terminate their contracts with the government, these five IPPs prioritised the nation’s interests over their own. The take and pay system has ended for them,” the premier said addressing the Cabinet.
The move will also save the national exchequer Rs411 billion, creating more fiscal space for the cash-strapped government.
The federal government has been under immense pressure to reconsider its agreements with the IPPs following outcry across the country as the addition of capacity payment charges inflated the power bills beyond the affordability of the inflation-burdened masses.
Addressing the cabinet meeting, the premier said that tariffs would also be reduced by gradually revising agreements with other IPPs in the power sector.
PM Shehbaz said: “The rate of inflation was more than 30% [in the same month during the previous year], it now stands at 6.9%.”
Praising the five IPPs, the premier said these IPPs proved to be the first drops of rain in the initiation of the process of providing relief to the public.
Earlier this month, the IPPs had agreed to terminate their contracts as demanded by the government.
An official, who was part of the task force on the power sector, told The News that the modalities were being settled, and once finalised, all five IPPs would sign the documents to terminate the contracts.
The development came after PM Shehbaz’s administration, last month warned the IPPs’ owners of “consequences” over failure to voluntarily terminate the power purchase agreements (PPAs).
“The entire cabinet, including me, is grateful to these IPP owners,” he added, further mentioning that the task force established for the reform of the power sector and the members of the federal cabinet deserve praise for this effort.
He also highlighted the record increase in remittances from overseas Pakistanis. “Record remittances of $8.8 billion in the last quarter reflect the confidence of overseas Pakistanis in government policies.”
During the cabinet meeting, the details of the agreement between the task force and the owners of the IPPs — including Hubco, Lalpir, Saba Power, Rousch Power, and Atlas Power — and the process of concluding the agreements with them were presented before the cabinet.
Out of these IPPs, Rousch Power was established under a build-own-operate-and-transfer agreement, which will be privatised by the Privatisation Commission after the transfer of its ownership to the government.
The ownership of the other four IPPs will remain with their owners, while no payment will be made by the government after terminating the government contract.
