ISLAMABAD: The owners of four independent power producers (IPPs) established under the 1994 policy and one under the 2002 policy have been given an ultimatum by the government. They must voluntarily terminate their power purchase agreements (PPAs) or face severe consequences, according to a report by The News on Monday.
Officials have conveyed to the IPP owners that the government will no longer pay capacity payments, which range from Rs139-150 billion per annum, for the next three to five years. This decision stems from the government’s stance that it has already made excess payments to these IPPs in the form of capacity payments, returns on equity, and loans.
One IPP owner reportedly responded to the task force on IPPs, stating that if the government pays Rs55 billion to his company, he would be willing to terminate the contract and hand over the plant. However, the government has refused this offer, stating that they will not pay Rs55 billion and will not take control of the plant. The IPP owner has been left with no option but to terminate the agreement voluntarily.
The task force has accused the IPPs of flouting their agreements with the government. They allegedly raised funding for other powerhouses by pledging their plants, which violates their contracts. The authorities have indicated that these actions are sufficient grounds for initiating criminal proceedings.
Furthermore, the IPPs are accused of deceiving the government by falsely reporting losses under operation and maintenance (O&M) costs during 2020-24, thereby making unjustified profits in the billions of rupees.
The owners of the four IPPs, including a former state minister for petroleum during the PTI government, have been summoned to meet with key members of the task force. They have been informed that failure to terminate their agreements will lead to a forensic audit of their plants, recovery of excessive profits obtained through wrongdoing, and the initiation of criminal proceedings against them.
An eminent business tycoon from Lahore, who owns power plants and other businesses across various sectors, is scheduled to meet with the authorities today. Meanwhile, the incumbent State Minister for Power Division, Muhammad Ali, has offered the IPPs a potential solution. He has promised to establish a private power market regime within the next two years, allowing the IPPs to sell their electricity to business entities after terminating their PPAs.
The government’s directive to the IPPs marks a significant shift in the power sector’s regulatory landscape. By refusing to continue capacity payments and pushing for the termination of existing PPAs, the government aims to address financial imbalances and alleged contractual violations. The forthcoming meetings between IPP owners and the task force will be crucial in determining the future of these power agreements and the overall strategy for the private power market in Pakistan.
