Disco buyers seek dollar returns, sovereign guarantees and exemption from costly IPP power purchases

Potential buyers of Pakistan's three electricity distribution firms have pressed for dollar-linked returns, sovereign guarantees shielding contracts from reopening and an exemption from buying costly IPP power, according to Profit by Pakistan Today, which cited The Express Tribune. Officials indicated that the dollar-profit request and the IPP exemption are unlikely to win acceptance, given their consequences for consumers and the wider economy. The government nonetheless intends to respond to legitimate investor concerns about the market framework that will apply after privatisation.

Investor feedback from recent visits at home and abroad has reached Prime Minister Shehbaz Sharif, who asked the Privatisation Commission to build a clear, rules-based plan for the period after privatisation. The first phase covers Faisalabad, Gujranwala and Islamabad, and about 12 investors, including four foreign firms, have expressed interest. Bidders want protection from renegotiation beyond the agreed control period, and officials link this to the government's earlier push to rework IPP contracts, which they had called one-sided.

Investors also want a longer tariff horizon than the current five-year period, proposing seven to ten years instead, and a shift from the uniform rate to one linked to performance. Bidders are seeking freedom over staffing, opposing any freeze on job cuts, while the government could still adopt a one-year minimum period without layoffs. Pension and legacy liabilities remain contentious, as investors want them removed from the transaction but the finance ministry objects to that step.