Govt. Slashes Profit Margin of IPPs

In a breakthrough development, the Federal government has limited the profit margin of Independent Power Producers (IPPs) which will help to reduce the price of electricity for consumers.

According to details, the government has successfully negotiated improved business terms and has signed an MoU with IPPS set up under the Power Policy 2002, and has altered some existing rules after taking IPPs into confidence. It will soon do the same with IPPs established under other power policies as well.


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Under the MoU, the profit margin of IPPs has been slashed from 15% to 12% and they will not be entitled to capacity payments in the future.

In case IPPs earn more profit than 12%, they will be bound to share the maximum proportion of the additional profit with the government. NEPRA will decide whether IPPs have earned excess profit under the Power Policy 2002.

Moreover, the government has repealed the clause of disbursing profit to the local investors in the IPPs in US dollars. However, foreign investors will continue to receive the profit in US dollars.


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Saif Power Company Limited’s Secretary Waseemullah has disclosed the contents of the MoU signed with the government which states:

There will be no future US dollar indexation. For foreign equity investment registered with the State Bank of Pakistan (SBP), the total return on equity (including ROE during construction) shall be changed to 12% per annum. For local investors, the total ROE shall be changed to 17% per annum in Pakistani rupee at the rupee-dollar exchange rate of 148 per US dollar.

The MoU will remain valid for the next 6 months and will be terminated once the government and IPPs officially sign an agreement.

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