According to news sources, authorities, in consultation with the recently created power task force, have decided to retire/gradually phase out 15 IPP contracts with immediate effect.

Planned terminations for the IPPs include the following: KAPCO, Kohinoor Energy, Gul Ahmed Energy, Liberty Power, Tapal Energy and Attock Gen Limited.

The IPPs whose phased-out retirement is being phased out include HUBCO Base, Lalpir Power, PakGen Power, Rousch Power, Fauji Kabirwala, Habibulla Coastal, Japan Power, Saba Power, and Southern Electric.

With many of these capacities already expired/non-operational due to their fuel/generational inefficiencies, authorities have focused on the low-hanging fruit by gradually terminating/phasing these IPPs out. It’s important to note that these IPPs were part of the master agreement amendments in 2020 as well, which led to a downward negotiation of their ROE components. Further, four of the six IPPs planned for immediate retirement have expired PPAs, meaning they do not bill capacity payments to the power purchaser.

Therefore, we believe this move will have minimal impact on the power purchase costs currently billed towards the CPPA-G. However, early retirement of IPPs with remaining tenures may be settled with a payout of the present value of capacity payments due for the remaining tenures.

Courtesy – AKD Research