Pakistan’s federal government signed four new agreements with Independent Power Producers (IPPs) in 2025, including a 30-year deal with the Jamshoro Coal Power Plant, even as it seeks to end or renegotiate costly power contracts.
The government has previously moved to terminate and renegotiate IPP agreements to reduce the financial burden of capacity payments and lower electricity costs, with six agreements terminated and others revised as part of the effort.
However, details of the latest agreements, including their duration and validity, have now emerged in the media, as per which the government signed an agreement with the Jamshoro Coal Power Plant on July 30, 2025, for a period of 30 years.
The new long-term deal comes as Pakistan continues to face a heavy financial burden from payments to power producers.
The country paid about Rs6.4 lakh crores in capacity payments over the five years from 2020-21 to 2024-25, according to figures presented by Energy Minister Sardar Awais Ahmad Khan Leghari in the National Assembly.
Capacity payments are charges paid to power producers for maintaining available generation capacity, regardless of how much electricity is actually produced.
Annual payments rose from Rs61,390 crore in 2020-21 to Rs77,590 crore in 2021-22, before reaching Rs1,30,600 crore in 2022-23 and a record Rs1,90,200 crore in 2023-24.
A further Rs1,80,700 crore was paid in 2024-25.
The government has said its efforts to reduce the cost of power contracts have generated major savings.
According to the energy minister, agreements with six IPPs were terminated following a review by a government task force, while other agreements were revised to reduce tariffs.
The changes are expected to save Rs4.3 lakh crores over the remaining life of the power plants.
The government has also sought broader reforms in the power sector to reduce tariffs and address structural problems that have contributed to Pakistan’s circular debt.
