Islamabad: In a strategic move to optimize the energy sector, the government, in consultation with a newly formed power task force, has decided to terminate or phase out 15 independent power producer (IPP) contracts. This decision targets IPPs with expired or non-operational capacities due to inefficiencies, aiming to reduce unnecessary financial burdens on the power system.

According to AKD Securities Limited, the immediate terminations will affect IPPs like KAPCO, Kohinoor Energy, Gul Ahmed Energy, Liberty Power, Tapal Energy, and Attock Gen Limited, which are among those with contracts that have already expired or are deemed non-operational. These six IPPs do not require capacity payments, minimizing the financial impact of their cessation.

The phased retirement includes HUBCO Base, Lalpir Power, PakGen Power, Rousch Power, Fauji Kabirwala, Habibulla Coastal, Japan Power, Saba Power, and Southern Electric. All selected for phased termination were part of the 2020 master agreement amendments that adjusted their return on equity components. The government anticipates that these planned terminations and phased retirements will largely affect only the non-contributing elements of the power portfolio, thereby streamlining operational efficiencies and costs.

Furthermore, early retirements of IPPs with remaining contract tenures might involve compensations equivalent to the present value of the outstanding capacity payments, a move calculated to mitigate broader financial impacts on the Central Power Purchasing Agency – Guarantee (CPPA-G).