IPPs call emergency meetings as govt moves towards early contract termination

KARACHI: Two publicly listed independent power producers (IPPs), Hub Power Company Limited (Hubco) and Lalpir Power Limited, have called emergency board meetings following the government’s decision to initiate the premature termination of their agreements.

According to media reports, five IPPs have agreed to enter negotiations with the government for the early retirement of their contracts.

This comes after a task force on the power sector finalized a plan to address key issues, particularly capacity payments, which have sparked a nationwide debate.In a notice to the Pakistan Stock Exchange (PSX) on Wednesday, Hubco announced, “An emergent meeting of the board of directors of the company will be held on Thursday (October 10) to present to the board the terms proposed for the premature termination, in October 2024, of the company’s implementation agreement, power purchase agreement, fuel supply agreement, and guarantee, which were originally scheduled to expire in March 2027. This follows discussions with the task force constituted under the PM Office and certain IPPs, including Hubco.”

Lalpir Power Limited issued a similar notice to the PSX on Tuesday, stating, “An emergent meeting of the Board of Directors of Lalpir Power has been called to present to the board the terms proposed for the early termination of the company’s implementation agreement, power purchase agreement, and guarantee, following discussions between the government of Pakistan, its entities, and certain IPPs, including Lalpir Power.”

These developments signal significant movement in the power sector, as the government looks to renegotiate or terminate contracts with IPPs in an effort to address financial challenges and reform the industry.

Earlier, The News reported that the task force has identified 18 IPPs for discussions on transitioning to a ‘take-and-pay’ model. Talks are also expected to extend to government power plants (GPPs), which will be treated similarly to IPPs. GPPs will also be moved to a take-and-pay system, although they will receive sufficient payments to maintain operational capacity.