Power Deal Revoked: Hub Power & Government in Settlement Talks

Hub Power Company Ltd has prematurely ended a power purchase agreement with the Pakistani government. The settlement of outstanding receivables is on the agenda after renegotiations on electricity tariffs amid soaring energy costs. This termination date is moved to October 1, 2022, from March 2027.

Hub Power Company Ltd, Pakistan's largest private utility, announced the early termination of a power purchase agreement with the government on Thursday. The company and the Central Power Purchasing Agency (CPPAG) aim to settle outstanding receivables by October 1. This comes amid government efforts to renegotiate power deals to lower soaring electricity costs affecting consumers and businesses.

The company's board opted for an earlier deal expiry of October 1, instead of the initially planned March 2027, citing 'greater national interest.' This change follows past approvals of numerous private power projects to address chronic shortages. However, high guaranteed returns and payments for unused power in those agreements led to excess capacity amid weakened consumption during an economic crisis.

The government’s need to revisit these power arrangements was crucial in recent IMF negotiations for a $7-billion bailout. Discussions continue on restructuring power sector debt, including obligations to China, in addition to implementing promised structural reforms and halting subsidies.

(With inputs from agencies.)