Pakistan government will pay PKR 72 billion to five power producers

Pakistan government has decided to pay PKR 72 billion ($257.14 million) to five Independent Power Producers (IPPs) as the final settlement, as their contracts have been terminated.

This agreement, which excludes late payment surcharges, will see Hubco receiving PKR 36.5 billion, Roush Power PKR 15.5 billion, Lal Pir Power Company PKR 12.8 billion, Atlas Power Limited PKR 15.5 billion, and Saba Power PKR 6 billion. The contracts with these IPPs ended effective October 1, 2024.

These plants, with a combined generation capacity of 2,463 MW, were set to expire within the next two to three years.

On October 10, the government announced the termination of power purchase agreements (PPAs) with these five IPPs, which are among the oldest in the country.

This move is expected to save PKR 411 billion and reduce the average electricity tariff by around 71 paise per unit, which currently stands at about PKR 36 per unit, excluding taxes and duties.

Additionally, the government has announced the creation of the Independent System and Market Operator (ISMO) by merging the Central Power Purchasing Agency (CPPA) and the National Power Control Centre (NPCC).

This new entity aims to shift the power sector to an operational exchange system similar to a stock exchange over the next three to four years.

The ISMO is expected to be fully operational by January 2025, promoting competition and enhancing the power sector.

The National Transmission and Despatch Company (NTDC) is also undergoing a complete transformation.