- Government Cannot Walk Away: The government cannot unilaterally terminate sovereign guarantees-based contracts with Independent Power Producers (IPPs) due to potential huge penalties in arbitration courts .
- Renegotiation Possible: The government can renegotiate contracts if IPPs volunteer to talk, potentially providing some relief to end power consumers .
- Export Industry Affected: The export industry has become unviable due to the highest industrial tariff in the region, with competing economies having lower tariffs .
- Capacity Payments: The government is projected to pay over Rs2 trillion as capacity payments alone this year, with a significant portion going towards loan and interest payments .
- Potential Solutions: The government is exploring options to reduce capacity payments, including re-profiling loans and issuing panda bonds, and potentially converting imported coal power plants to Thar coal .
- Return on Equity: Reducing the return on equity (RoE) for government-owned power plants could lower the basket tariff price for end consumers, but further reductions may trigger financing crises for ongoing and future projects .
#IPPs #PowerSector #Pakistan #EnergyPolicy #ExportIndustry #CapacityPayments
