Karachi, January 5, 2024 – K-Electric Limited (KE), the sole electricity distributor for Karachi and its suburbs, has inked a transformative Power Purchase Agency Agreement (PPAA) with the government of Pakistan for a significant term of 10 years.
This landmark agreement, along with a Tariff Differential Subsidy Agreement (TDSA), signals a strategic move towards a more robust and streamlined power supply mechanism.
In a disclosure shared with the Pakistan Stock Exchange (PSX) on Friday, KE revealed the successful execution of the PPAA and TDSA with the government, facilitated through its representative bodies. These agreements, in conjunction with the Interconnection Agreement (ICA), have received approval from the Economic Coordination Committee and have been ratified by the Federal Cabinet. The pending ICA is set to be finalized upon approval from the National Electric Power Regulatory Authority (NEPRA).
The Power Purchase Agency Agreement, spanning a decade, aims to formalize and regularize the existing power supply arrangement between KE and the national grid. Additionally, the anticipated signing of the Interconnection Agreement for the same term, coupled with KE’s planned investments in network interconnection capacity, will empower KE to procure a substantial power supply—up to the interconnection capacity, including a firm basis of 1,000MW—from the national grid.
Simultaneously, the Tariff Differential Subsidy Agreement, also sealed for a decade, is poised to streamline the procedures related to filing, verification, and release of KE’s Tariff Differential Subsidy claims from the government of Pakistan. This strategic move aligns with the broader objectives of promoting transparency and efficiency in the energy sector.
In a comprehensive approach to dispute resolution, a mediation agreement has been executed between KE and government parties. This agreement aims to address and settle longstanding disputes surrounding historic receivables and payables, fostering an environment conducive to collaboration and growth.
The 10-year commitment reflected in these agreements underscores a shared vision for long-term sustainability and reliability in the energy sector. KE’s ability to off-take a substantial power supply from the national grid, coupled with streamlined subsidy claim processes, sets the stage for enhanced operational efficiency and a more stable electricity distribution system in the Karachi region.
This strategic alignment between KE and the government is a positive development, providing a stable foundation for future investments, infrastructure development, and the overall growth of the energy sector in the region. Stakeholders are closely monitoring these advancements as they signal a positive trajectory for the energy landscape in Karachi, ultimately contributing to the broader economic development of the city and its surroundings.
