ISLAMABAD - After almost nine years of supplying electricity to K-Electric without any contract, the caretaker government Friday inked power purchase agreement (PPA) for the supply of 1000MW electricity to the company.
The Government of Pakistan and KE have reached a significant milestone by signing various agreements underpinning Karachi’s energy security. The signing ceremony took place at the Energy Division on Friday and resolved long-standing disputes between the Government and KE, with foremost among these being regarding formalizing and securing a firm supply of power from the national grid to Karachi up to the interconnection capacity.
The agreements were signed by Government of Pakistan through its representative bodies in the presence of Muhammad Ali, Minister of Energy, Power and Petroleum, and Dr Shamshad Akhtar, Minister of Finance, while KE was represented by CEO, Moonis Alvi and CFO, Muhammad Aamir Ghaziani.
These agreements pertain to legacy matters, resolution of which was critical for Karachi and also for KE’s sustainability as a company. Government of Pakistan, KE and various critical power sector stakeholders had been engaged in talks for a significant period of time. The meeting saw resolution and signing of the Tariff Differential Subsidy Agreement (TDA), and Power Purchase Agency Agreement (PPAA), thereby marking a significant milestone for the power sector at large.
The Power Purchase Agreement (PPA) with KE had expired in 2015 and since then the company was getting electricity from the national grid without any PPA. Under the PPA, the federal government would be bound to provide 1,000MW of electricity to KE for 10 years. The supply of electricity could go up depending upon the availability of excess electricity in the national grid.
Similarly, the Interconnection Agreement (ICA), is also expected to be signed after approval from NEPRA. Firm supply of energy from the national grid will facilitate access to affordable power for KE customers. The signing of a Mediation Agreement (MA) is also crucial for the reconciliation of legacy contentions on payables and receivables between KE and Government entities.
Chief Executive Officer KE, Moonis Alvi said on the occasion “Today is a momentous occasion for us, representing a paradigm shift in the energy landscape as well. We have been working on these issues since as long as I can remember.” Firm supply for Karachi addresses the energy trilemma for the consumers of Karachi while also alleviating the subsidy burden on the Government of Pakistan in the long run. “We believe, the resolution of these matters will also enhance our journey towards sustainability as a company,” he added.
Caretaker Minister of Energy, Power and Petroleum Muhammad Ali, said on the occasion , “We are tackling a Gordian knot in the power sector with a vision to bring efficiency and long-term stability. Today’s signing is one facet of this, where we have addressed legacy bottlenecks. It demonstrates the willpower and commitment of our institutions towards Pakistan. The Ministry is working hard to provide an enabling environment for the power sector to thrive because the ultimate beneficiary of our interventions is the customer.
Caretaker Minister for Finance, Dr Shamshad Akhtar stated: “Energy underpins progress on a national level. Streamlining issues and resolving legacy matters therefore is of utmost importance. We believe that today’s achievement will also send a strong positive signal to investors across the globe who are eyeing Pakistan as a potential market. The energy sector is undergoing a revolution and we are committed to support it.” Following recent approval by the Economic Coordination Committee (ECC) chaired by Dr. Shamshad Akhtar, the summary had been ratified by the Cabinet also and was developed on the recommendations put forward by the Prime Minister’s taskforce on Energy that was chaired by Shahid Khaqan Abbasi. In December 2023, Caretaker Prime Minister, Anwaar ul Haq Kakar met with representatives of Saudi Group Al Jomaih, KE’s oldest and one of the largest shareholders since privatisation and assured them of support from Govt of Pakistan.