Ten Independent Power Producers (IPPs) established under Pakistan’s 2002 Generation Policy have approached Prime Minister Shehbaz Sharif, seeking to terminate their sovereign contracts due to what they describe as unfair terms. Among these IPPs are major players such as Pakgen Power, Nishat Power, and Hubco Narowal.

The IPPs have expressed concerns over being unfairly blamed for high consumer tariffs due to capacity payments, according to a report by Business Recorder. This move comes ahead of scheduled negotiations aimed at altering the IPPs’ Power Purchase Agreements (PPAs) from a “Take or Pay” model to a “Take and Pay” approach. The proposed change would require IPPs to bear significant fixed costs without any guaranteed power purchase from the government, a situation the IPPs argue is financially unsustainable and could lead to bankruptcy.

In their communication, the IPPs contend that attributing high consumer tariffs solely to capacity payments is misleading. They point out that tariffs are influenced by various factors, including high taxes, distribution losses, and currency depreciation, with less than half of the capacity payments going to privately owned IPPs.

The IPPs have outlined four conditions for terminating their contracts, which include the full settlement of past dues, permission to sell power to private buyers, and a guarantee of continued LNG supply.

The power producers argue that meaningful reductions in consumer tariffs require systemic reforms in power distribution, tax reductions, and increased sales, rather than further cuts to capacity payments. They have requested an urgent meeting with the Prime Minister and other stakeholders to reassess the ongoing negotiations and address these longstanding issues.