UBG successfully renegotiates five IPP contracts

Pakistan revises first five IPP contracts, shifting to a 'take-and-pay' model, easing financial strain on the economy.

ISLAMABAD:

In a major development, efforts by the United Business Group (UBG) through the Federation of Pakistan Chambers of Commerce and Industry to renegotiate contracts with Independent Power Producers are nearing completion. On Thursday, UBG Patron-in-Chief S M Tanveer announced that the first five contracts had been successfully revised and approved by the cabinet.

This breakthrough comes after years of IPPs receiving an annual sum of Rs100 billion in capacity charges while generating minimal electricity. Tanveer hailed the renegotiation of these contracts as a significant step in reducing the financial burden on Pakistan's economy.

"We appreciate the Task Force on IPPs, led by Special Assistant to the Prime Minister Mohammad Ali and senior officials, for ensuring Pakistan's economic and social sustainability by revising the IPP contracts to a 'take-and-pay' model," said Tanveer. Under this new arrangement, payments will be made solely for the electricity that is produced and supplied to consumers, a shift from the previously criticised 'take-or-pay' model. The earlier model had guaranteed steady income for IPPs, regardless of actual electricity demand, exacerbating the country's circular debt problem. Tanveer stressed that the successful renegotiation of these IPP contracts marks a crucial step in addressing energy sector woes and building a more sustainable future. The revised contracts are expected to set a precedent for the remaining 102 IPPs, as the country moves towards a more efficient and cost-effective energy production system.