IPP Alleges Forced Contract Renegotiations, Offers Contract Termination

New-IPPs

ISLAMABAD: M/s Sapphire Electric Company Limited (SECL) has raised concerns over what it claims to be the fourth instance of forced renegotiations of sovereign power contracts. The company’s CEO, Shahid Abdullah, suggested in a letter to Prime Minister Shehbaz Sharif that SECL would be willing to terminate its contract and forgo capacity payments if the government accepts its proposals.

In contrast to the Task Force on Energy’s assertion of mutual consent in ongoing negotiations, other independent power producers (IPPs) have also expressed similar reservations in a joint letter to the Prime Minister. The German government has voiced concerns over a “controversial” deal involving M/s Rousch Power, a project in which German firm Siemens holds a stake.

Currently, negotiations between the Task Force and 18 IPPs aim to transition from “take-or-pay” to “take-and-pay” agreements, with some IPPs resisting demands to return Rs 55 billion in overpaid funds. Abdullah argued that the high consumer tariffs, driven by factors beyond IPP capacity payments, are financially unsustainable in the single-buyer market. He asserted that a shift to “take-and-pay” arrangements without allowing IPPs to sell power to private buyers would financially strain generators, potentially leading to bankruptcy.

Abdullah proposed several conditions for terminating existing contracts: payment of outstanding dues, termination of all “take-or-pay” agreements across the board, permission for IPPs to sell power to private buyers, and continued LNG supply under current terms. He also emphasized that sustainable tariff reductions require comprehensive reforms in transmission, distribution, and taxation rather than piecemeal changes at the expense of the IPP sector.

Story by Mushtaq Ghumman

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