The government is set to begin summoning the heads of 18 independent power producers (IPPs) established under the power generation policies of 1994 and 2002 next week.

The aim is to discuss options for converting their operational contracts from a “take or pay” model to a “take and pay” model, Business Recorder reported while citing sources.

The government has previously claimed that terminating the power purchase agreements (PPAs) of five IPPs has resulted in savings of Rs411 billion for the national exchequer. The cabinet approved the termination of such agreements and a final settlement on October 10, 2024, although the final documents have yet to be signed.

The IPPs slated for conversion have already completed their internal assessments regarding the potential financial impacts and are preparing their positions for meetings with the task force led by the power minister. But it appears that other “key personnel may be influencing the negotiations behind the scenes.”

The PPAs for several IPPs targeted for conversion to a “take and pay” model have expiry dates exceeding 15 years.

In the negotiations, short-term tariff relief is expected to range from Rs8 to Rs10 per unit. The financial impact from discussions with various plants is projected to be between Rs3 and Rs3.50 per unit.

Moreover, re-profiling is anticipated to have an impact of Rs3.75 per unit while waivers from provincial electricity duty could contribute Rs0.65 per unit. Other factors include a reduction of Rs0.16 per unit from PTV Free and some relief from decreases in sales tax and income tax.

Power Minister Sardar Awais Ahmad Khan Leghari noted that the reduction in Return on Equity and profits from the government’s own power plants could amount to up to Rs1.50 per unit. Similarly, the agreements for IPPs established under the 2002 power generation policy are expected to have a financial impact of Rs1.50 per unit.