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Power Dispute in Pakistan

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October 26, 2000 

ISLAMABAD (AP) - Pakistan's army government reached its first big settlement with disgruntled private and semi-private power producers Wednesday, Finance Minister Shaukat Aziz said.

The agreement with Kot Addu Power Company (Kapco) -- 36 percent owned by the British-based International Power and 64 percent owned by the government utility, Water and Power Development Authority (WAPDA) -- is seen as a breakthrough by the government.

Pakistan has been at odds with its private and semi-private power produces for the past four years making foreign investors nervous about putting their money in Pakistan.

At the heart of the dispute is the rates charged by the private and semi-private power companies. The previous government of Nawaz Sharif accused the private power companies of negotiating inflated rates with his predecessor former prime minister Benazir Bhutto.

The army government that took power in October 1999 has promised to try to settle the protracted dispute.

Aziz told a news conference in the federal capital of Islamabad that the agreement with Kapco is the first step to resolving other outstanding power disputes, including with the country's largest private power producer, Hubco.

That agreement with Kapco reduces the per kilowatt hour charge from 5.6 cents to 4.8 cents.

The renegotiated rate will mean an annual savings of dlrs 60 million for Pakistan's utility company, said WAPDA chief Gen. Zulfikar Ali Khan.

As well the agreement gives WAPDA a greater input in the management of the company. Previously the British-based company International Power had been running the management. The new agreement puts WAPDA in greater control, explained Aziz.

But for the army government which is trying to revive Pakistan's ailing economy the settlement is hoped to return investor confidence to Pakistan.

"This will create a conducive atmosphere for investment," said Aziz. "This agreement has shown that other issues can be resolved."

The biggest outstanding dispute is with Hubco Hubco, which is heavily financed by the World Bank and largely owned by the British-based National Power. That dispute has been ongoing for several years and has driven the share prices of Hubco down on the Karachi Stock Exchange.