Early termination of IPP contracts saves Pakistan Rs411bn: Awais Leghari

October 11, 2024 (MLN): Pakistan has saved a substantial amount of Rs411 billion by opting for the early termination of several key contracts with five independent power producers (IPPs), Federal Energy Minister Awais Leghari announced during a media briefing yesterday.

Awais Leghari, while sharing details of the negotiations, said that all previous payments, whether related to capacity charges, energy costs, or insurance costs, would be paid by the government to these IPPs.

However, no further amounts will be provided after these payments.

“No fines will be paid for the early termination of the plants and agreements,” he noted.

Moreover, the equity of these companies, as well as the expected future returns from these agreements, will also not be compensated.

Additionally, any late payments related to payables will not be made.

An early termination of these contracts reflects a strategic shift related to power generation, payments, or fuel supply.

Yesterday, the Directors of Hub Power Company Limited (PSX: HUBC), in the greater national interest, decided to initiate a Negotiated Settlement Agreement with regard to the accelerated expiry on October 1, 2024.

Lalpir Power Limited (PSX: LPL), also in its emergent board meeting decided to place the agenda of early termination with the shareholders of the company.

According to their respective notices issued by both the power producers, the contracts include the Implementation Agreement, Power Purchase Agreement, Fuel Supply Agreement, and related Guarantee.

This follows discussions initiated with a Task Force constituted under the Prime Minister's Office, along with other IPPs.

According to media reports, certain IPPs are dissatisfied with the pressure during negotiations, and disputes remain over capacity payments and government defaults.

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