The Economic Coordination Committee (ECC) of the cabinet has approved revised agreements with several power producers aimed at reducing long-term financial liabilities in the country’s energy sector. The decision, taken during a meeting chaired by Finance Minister Muhammad Aurangzeb in Islamabad, is expected to generate significant savings while clearing outstanding dues to power producers.
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Officials said the renegotiated deals with 14 wind power producers, a solar project of the Punjab government and other power plants would result in estimated savings of around Rs163 billion over the lifetime of the projects. At the same time, the government plans to immediately release about Rs235 billion in outstanding payments to government-owned power plants and other energy producers.
The committee was informed that older wind projects operating under the 2013 upfront tariff had much higher electricity prices, reaching up to Rs42 per unit. In contrast, projects approved after 2018 have tariffs closer to Rs17 per unit. A government task force on energy, led by Zafar Iqbal, negotiated revised terms to lower future tariff obligations.
Under the new arrangements, several wind power producers agreed to revise their contracts after the completion of their debt repayment periods. The revised deals include fixing the return on equity in rupees based on the exchange rate at the time of debt repayment expiry, lowering operation and maintenance costs and revising indexation mechanisms.
Eleven independent power producers working under the 2018 tariff framework also agreed to similar adjustments, including waiving late payment interest and reducing future delayed payment charges. These changes are expected to save about Rs78.6 billion during the projects’ lifetimes.
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Additional savings of about Rs45.7 billion are projected from revisions to the Quaid-i-Azam Solar Power (Pvt) Ltd project run by the Punjab government. The ECC also approved termination of a contract with a small independent power producer and adjustments to late payment surcharges for government-owned plants.
The committee further sanctioned more than Rs10 billion in supplementary grants for several ministries and approved Pakistan’s annual contribution to the International Energy Forum.