Pakistan’s ISI forced five local utility companies to end electricity supply contracts early with the government, The Financial Times has reported.
Pakistan's government, on October 10, ended power purchase contracts with five private companies, including one with the country's largest utility that should have been in place until 2027, to cut costs.
Prime Minister Shehbaz Sharif’s office said the local power companies had “prioritised national interest over personal interest” and “voluntarily agreed” to terminate their contracts.
However, executives from the energy sector told FT the agreement with the five publicly listed “independent power producers” followed weeks of pressure from security services.
“We will go to any measure even beyond our imaginations to get the issue settled. Time has come to give a final blow to such IPPs," one military officer told an energy executive in a text message seen by the publication.
Coercion and threats?
As per the report, meetings were held between senior executives and senior security officials, out of which some were attended by Nadeem Anjum, ISI head, before he retired in late September.
One businessman involved in the process said the talks had been more an “execution than a negotiation”.
Security service and government officials threatened to investigate energy investors’ ventures in other sectors if they did not comply with the government’s demands, the report further added quoting sources.
“Coercion and threats worked. At the end, all sponsors and investors are human and take decisions to ensure their physical and business interests’ wellbeing,” the source further said.
Govt denies allegations
Pakistan's power ministry denied the allegations, said the talks were done in a constructive manner. They said, “The negotiations took place in a cordial and constructive environment, and the allegations of harassment are completely unfounded and baseless.
The Pakistan Armed Forces also denied any use of threats or intimidation.
Pakistan’s power minister, Awais Leghari, told the publication, that the government and the power companies held multiple talks to revise the terms of the agreements and to take into account the companies’ objections.
There was a shared understanding between both the parties that a solution was needed to keep the entire power sector from going bankrupt, he said. “In spite of the termination of the contracts, they [the power companies] will have still made far higher returns than they would have in any other country," he added.
What happened last week?
Pakistan's biggest private utility, Hub Power Company Ltd, one of the five companies, said it agreed to prematurely end a contract with the government to buy power from a southwestern generation project.
In a note to the Pakistan Stock Exchange, it said the government had agreed to meet its commitments up to October 1, instead of an initial date of March 2027, in an action taken "in the greater national interest".
By close of trade on Friday, shares in Hubco had fallen more than 30 percent since September 18, while those in Lalpir Power, another utility that agreed to end its contract early, were down 32 percent.
What was the initial agreement?
To tackle widespread electricity shortages a decade ago, Pakistan approved dozens of private projects by independent power producers (IPPs), financed mostly by foreign lenders.
The move eased crippling blackouts but power tariffs have more than doubled over the past three years in Pakistan, as the heavily indebted government cut subsidies and passed capacity payments for about 40,000MW of installed generating capacity — much of it sitting idle — on to consumers.
With inputs from agencies
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