Who Owns IPPs in Pakistan? How Much Capacity Charges Have They Received?

Dr. Gohar Ejaz, a member of the caretaker cabinet in the recent elections, has made some alarming revelations about IPP companies. According to him, out of 106 IPPs, 48% are owned by 40 major families, and these companies are charging an unjustified Rs. 60 per unit for electricity instead of the actual cost of Rs. 30 per unit. He stated that only 30% of the electricity was purchased from IPPs, but they were paid for 70%. Even those who didn't produce a single unit were paid millions. Dr. Gohar Ejaz has demanded that Energy Minister Awais Leghari make the data of all 106 IPPs public.

Interestingly, when Dr. Ejaz himself was in the caretaker government and claimed to know about the shocking details of the agreements with IPPs, he did not disclose these details to the public. According to a report, most owners of these private companies are prominent business personalities and members of the ruling class. Among the top owners of IPPs are Jahangir Tareen, Nadeem Babar, Suleman Shehbaz, Razak Dawood, as well as the Mansha Group, Habibullah Group, and Sapphire Group.

In 1994, during Benazir Bhutto's second term, several contracts were signed with IPPs under the Power Policy, resulting in the inclusion of the Hub Power Plant in the system in June 1996. Every subsequent government chose the easy route of contracting new IPPs for costly electricity instead of setting up new hydropower projects and dams, which also provided ample opportunities for hefty commissions. This story, which began during Benazir Bhutto's era, continued to flourish through the tenures of Nawaz Sharif, Pervez Musharraf, Zardari, and once again during Nawaz Sharif's third term in 2013. It seemed like a bazaar of IPPs had been set up in the country.

The rulers of these eras signed the most expensive electricity contracts, the consequences of which are now being borne by the public through hefty bills. When Nawaz Sharif came to power in 2013, his Finance Minister Ishaq Dar, without auditing these companies, gave approximately Rs. 500 billion in circular debt to favored IPP companies. These payments were made based on photocopies of bills, disregarding regulations, which later emerged as a major scandal. The then Auditor General Akhtar Buland Rana raised legal objections to these payments.

In retaliation, the government permanently dismissed Auditor General Buland Akhtar Rana. Due to expensive electricity contracts and dollar-based capacity payments with IPPs, the public is now in such a dire situation that they are being forced to sell household items to pay their electricity bills. There is no doubt that the media played a significant role in exposing the exploitation by IPPs. The media tried to make the rulers realize that these agreements with IPP companies on unfavorable terms would not only break the back of the public but also become a noose around the neck of the rulers. Deliberately, clauses were included in the agreements to prevent future governments from reneging on these contracts. The ruling class ensured that the interests of these companies were well-protected while making agreements with IPPs.

It has been revealed that five major powerhouses in the energy sector have received tax-free payments.

These days, Independent Power Producers (IPPs) are frequently mentioned in Pakistan, often blamed for the high electricity bills imposed on the public. Some prominent figures have accused these IPPs of exploitation and deemed them disastrous for the country's economy. It is claimed that the owners of these companies include some significant political and business personalities in Pakistan. The question is, who are these individuals, and how much capacity charges were paid to them in the fiscal year 2023-24?

In Pakistan, there are about 100 IPPs, of which 51 are owned by various companies and groups. Seven are owned by political figures, 18 by international companies from countries like China, Singapore, and Norway, seven by the Government of Pakistan and the Government of Punjab, and 13 by private individuals.

Due to agreements with these IPPs, billions of rupees are paid annually through electricity bills. The government, through NEPRA, has signed contracts with these IPPs until 2057, meaning payments to these companies will continue for the next 33 years.

According to the Ministry of Energy, in the last 10 years from 2013 to 2024, IPPs have been paid Rs. 8,344 billion in capacity payments. Documents show that in the last fiscal year 2022-23, IPPs were paid Rs. 1,300 billion in capacity charges, and this year they will be paid Rs. 2,010 billion.

Political Figures’ IPPs

Suleman Shehbaz Sharif

Prime Minister Shehbaz Sharif's son, Suleman Shehbaz, owns an IPP named Chiniot Power Limited. This company was issued a license on June 11, 2014, during the PML-N government and agreed to produce 62.4 MW of electricity until June 30, 2045. Last year, this IPP produced 33% of its capacity, receiving Rs. 1.55 billion in capacity charges.

Jahangir Khan Tareen

Senior politician Jahangir Khan Tareen owns three power plants: AJ Power Private Limited, JDW Sugar Mills Unit 2, and JDW Unit 3. Contracts for these IPPs range from producing 12 MW since October 2015 until March 2041 and 52.70 MW since September 2013 until December 2043. Last year, JDW Sugar Mills Unit 2 received Rs. 1.09 billion and JDW Unit 3 received Rs. 770 million in capacity charges.

Abdul Razak Dawood

Former advisor to ex-Prime Minister Imran Khan and a member of General Pervez Musharraf’s cabinet from 1999 to 2002, Abdul Razak Dawood owns Rousch (Pakistan) Power Limited. The company was issued a license on August 28, 2006, with an agreement to produce 450 MW of electricity until August 25, 2029. Last year, this company produced only 4% of its capacity, receiving Rs. 6.88 billion in capacity charges.

Nadeem Babar

Former Special Assistant to the Prime Minister on Petroleum, Nadeem Babar, owns two IPPs. His company, Saba Power Company Private Limited, was issued a license on August 26, 2003, with an agreement to produce 134 MW of electricity until August 25, 2029. Last year, it produced only 11% of its capacity and received Rs. 3.13 billion in capacity charges. Additionally, he co-owns another IPP, Orient Power Project, with the Mehmood Group, which was licensed on July 22, 2005, to produce 229 MW until August 31, 2032. This company produced 32% of its capacity, receiving Rs. 5.80 billion in capacity charges.

Mian Mansha

Renowned businessman Mian Mansha’s Mansha Group owns four IPPs. His companies AES Lalpir Private Limited and AES Pak Generation Private Company were issued licenses on August 26, 2003, to produce 362 MW and 365 MW of electricity until August 25, 2027, and August 25, 2026, respectively. Last year, they produced 25% and 20% of their capacities, receiving Rs. 8.48 billion and Rs. 8.51 billion in capacity charges, respectively. Mansha Group’s other IPPs, Nishat Chunian Power Project and Nishat Power Project, were licensed on September 6, 2007, to produce 200 MW of electricity each until June 29, 2035, and December 30, 2034, respectively. Last year, they produced 19% and 30% of their capacities, receiving Rs. 4.17 billion and Rs. 4.59 billion in capacity charges, respectively.

### Highest Capacity Charges Paid

Last year, the highest capacity charges were paid to China Hub, amounting to Rs. 142.82 billion for an agreement to produce 1320 MW of electricity, of which it produced only 15%. Next, Port Qasim IPP received Rs. 121 billion for an agreement to produce 1320 MW, of which it produced 18%. Shanghai Electric Thar Coal Power Generation IPP received Rs. 121 billion for an agreement to produce 1320 MW, of which it produced 68%.

There are three power-producing IPPs that did not produce any electricity last year but still received billions in capacity charges. Hubco, with an agreement to produce 1292 MW, received Rs. 24.23 billion, and Kapco, with an agreement to produce 1638 MW, received Rs. 22.16 billion in capacity charges, despite not producing any electricity last year.