Five Independent Power Producers (IPPs) in Pakistan are set to receive a total of Rs. 72 billion as part of a final cash settlement with the government, according to a report by JS Global.

This move comes as part of a broader strategy to renegotiate IPP agreements and transition from a ‘Take or Pay’ to a ‘Take and Pay’ model, as recommended by the International Monetary Fund (IMF) to reduce energy costs.

The IPPs involved in this initial settlement include Lal Pir, Hubco Base Plant, Rousch Power, Atlas Power, and Saba Power. These companies have volunteered to terminate their ongoing agreements in exchange for the settlement. The cash settlements are as follows: Lal Pir will receive Rs. 12.80 billion, Hubco Base Plant Rs. 36.50 billion, Rousch Power Rs. 15.50 billion, Atlas Power Rs. 6.00 billion, and Saba Power Rs. 1.00 billion.

The settlement aims to address the receivables and liabilities of these IPPs, with the government focusing on reducing the financial burden on the energy sector. The receivables and payables of these companies were assessed as of June 2024, with the settlements designed to clear outstanding dues.

In the next phase, 18 additional IPPs are expected to enter similar negotiations. These include Saif Power, Nishat Chunian Power, Nishat Power, Engro Power Gen Qadirpur, and others, with capacities ranging from 84 MW to 586 MW. The discussions will focus on voluntary changes to their agreements, aligning with the government’s efforts to streamline energy costs and improve efficiency.

This initiative is part of a larger effort to stabilize Pakistan’s energy sector and ensure sustainable power generation, while also addressing the financial challenges faced by IPPs.