Govt to terminate contracts with five IPPs in initial phase

Pakistan’s largest private utility, Hub Power Company Ltd, announced on Thursday the early termination of its agreement for the government to purchase power from a generation project.

This development follows Power Minister Awais Leghari’s statement to Reuters last month, where he mentioned the government was renegotiating deals with independent power producers (IPPs) to reduce electricity tariffs as households and businesses struggle with rising energy costs.

According to a notice issued to the Pakistan Stock Exchange, the government, along with the Central Power Purchasing Agency (CPPAG), has agreed to settle the company’s outstanding dues by October 1. The company’s board approved this revised termination date, moving it up to October 1 from the original expiration date in March 2027, citing the decision as being made “in the greater national interest.”

Separately, the government reached an agreement with five IPPs to renegotiate their power purchase contracts, a move expected to save the country Rs60 billion ($216.10 million) annually, as announced by Prime Minister Shehbaz Sharif on Thursday.

Chairing a federal cabinet meeting in Islamabad, Prime Minister Shehbaz stated, “Five IPPs, with mutual consent and prioritizing national interests over personal, have agreed to revise the power purchase contracts.”

“From today, the ‘take-or-pay’, terms of the previous contracts, with these five IPPs have been fully terminated,” he added, clarifying that only the outstanding amounts owed to these IPPs will be paid, without any interest.

State-run Radio Pakistan quoted PM Shehbaz as saying the move would benefit the national exchequer by approximately Rs411 billion. He further acknowledged the support of allied parties and especially praised Chief of Army Staff General Asim Munir for his personal involvement in the negotiations.