Pakistan Assures Lenders That IPPs Can Opt for Audit or International Arbitration

The federal government has assured top lenders including the International Monetary Fund (IMF), World Bank, and Asian Development Bank (ADB), that independent power producers (IPPs) unwilling to renegotiate contracts can get audited or opt for international arbitration. Power Minister Awais Ahmad Khan Leghari conveyed this commitment during a meeting with lenders, where he also announced plans to rationalize solar net metering and introduce lower electricity rates for select consumers to boost demand. A few weeks earlier, a group of international lenders, excluding the IMF—had written to the government, raising concerns over non-consultative revisions to IPP contracts, warning that such actions could harm Pakistan’s investment climate. Given the country’s push for private investment in power transmission and privatization, these concerns carried big weight. Leghari assured the lenders that the government’s negotiations with IPPs were conducted fairly and transparently. He also explained how important it was to evolve from the ‘Take or Pay’ to ‘Take and Pay’ contracts, the elimination of furnace oil-based plants, and shifting from imported to local coal. Last week, the government claimed to have secured Rs. 1.571 trillion in future savings through renegotiations with 27 IPPs. The government has shared that it saved Rs. 411 billion by terminating five IPP contracts, Rs. 238 billion by revising contracts with eight bagasse-based plants, and Rs. 922 billion from tariff adjustments for 14 thermal IPPs.