KARACHI: The share prices of independent power producers (IPPs) in Pakistan have plunged by 13% to 26% over the past three weeks as the government signals plans to prematurely terminate their power purchase agreements (PPAs) to curb rising energy costs. This decision is expected to severely impact the earnings and dividend payouts of these companies.
According to Topline Research, concerns over the revision or termination of these agreements have led to significant declines in IPP share prices. The Hub Power Company (HUBC) saw its stock fall by 23% in just 13 trading sessions since September 18, 2024. Other major IPPs like Lalpir Power Limited (LPL), Nishat Chunian Power (NCPL), and Nishat Power (NPL) have also faced share price drops of 26%, 13%, and 17%, respectively, during the same period.
The government is set to negotiate the early termination of PPAs with five power producers, including Hub Power and Lalpir Power. The move aims to reduce future capacity payments to these firms, potentially saving Rs0.6 per kWh in power costs.
Hub Power’s base plant alone contributed 32% to the company’s total earnings per share (EPS) in FY24. The termination of its PPA could lead to a substantial reduction in earnings through FY27. HUBC’s stock has already dropped by Rs34 since September 19, 2024, following a peak in July. Its dividend payouts are also expected to be halved, though future projects like Thar Energy and Thal Nova may help stabilize earnings by FY26.
Beyond these five IPPs, the government may also shift agreements with 18 other power producers from take-or-pay to take-and-pay models, affecting key players like Pakgen Power, Kohinoor Energy, and Engro Powergen Qadirpur. These changes are part of broader efforts to reduce energy costs, including converting coal plants to local coal and renegotiating terms for other IPPs.
Story by Salman Siddiqui
