Consensus on Discos’ sell-off: Working group formed for FA-stakeholder coordination

ISLAMABAD: The government has constituted a working group intended to coordinate with relevant stakeholders and the Financial Advisors to achieve consensus on the privatisation process of power Distribution Companies (Discos), well informed sources told Business Recorder.

In the first phase, the government is fast-tracking efforts to privatise three Discos— Islamabad Electric Supply Company (IESCO), Gujranwala Electric Power Company (GEPCO), and Faisalabad Electric Supply Company (FESCO) — with the goal of completing the process by the end of calendar year 2025. Financial Advisors, Alvarez & Marsal Middle East, has given the sectoral due diligence report.

The Working Group comprised of Abdul Basit Abbasi, Consultant, Privatisation Commission – (Convener), Sajid Akram, Director General, NEPRA, Umer Haroon, Independent System and Market Operator (ISMO), Umair, Senior Manager, CPPA-G, Salman Rehman, Director, NEPRA, Abdul Moiz Khawaja, Additional Joint Director SECP, Consultant, Power Division, nominee, Power Planning and Monitoring Company, nominee, CPPA-G, nominee, NEPRA DISCO’s team and nominees, Financial Advisor.

Discos’ sell off: ‘Turkish model’ under consideration

The Working Group will hold its first meeting on July 26, 2025 in the Ministry of Privatisation.

According to the Terms of Reference (ToRs), Working Group in furtherance of section 5(f), 5(g), and 5(t) of the Privatisation Commission Ordinance, 2000, the Chairman of the Privatisation Commission, is pleased to constitute a Working Group (WG) to address and resolve key issues identified in the Financial Advisor’s Sector Due Diligence (DD) report concerning government-owned Power Distribution Companies whereby the regulatory framework in which privatization will proceed will be studied to form the basis of policy, regulatory and/or administrative decisions required to be taken by the Federal Government before privatization.

The Working Group will coordinate with relevant stakeholders and the Financial Advisor to achieve consensus and provide recommendations on the following matters:(i) Bifurcation of Retail and Wire Business - recommendations with respect to bifurcation of retail and wire business and ancillary regulatory matters, such as licensing, dispatch and settlement processes, optimum tariff and subsidy regimes etc; (b) examination of legal and technical issues concerning housing societies and industrial zones, and their corresponding impact on the valuation and operations of DISCOs; (c) NEPRA’s deliberation to unbundle Distribution and Supply businesses; and (d) any other relevant and related matter.

Uniform Tariff and Industrial Cross-Subsidy Framework: Evaluation of the impact of the uniform tariff and existing cross-subsidies on DISCO valuation and recommendations for way forward.

Review of the Multi-Year Tariff (MYT) Framework will include (a) assessment of whether the current MYT and associated indexation mechanisms require revision, based on Financial Adviser’s feedback; and (b) MYT revision window at the time of the transaction.

Supplier of Last Resort (SoLR) Licencing: (a) analysis of the merits and demerits of issuing competitive supplier licenses to the SOLR from the perspective of potential investors; and (b) CTBCM status and future evolvement plans, possible future business combinations and changes to DISCOs business perimeter over time (Distribution/SOLR/CS).

Review of transition from current wholesale market to retail market trading: total quantum of power to be allocated to the wholesale market over the next five years and a clear roadmap for transition, review the details w.r.t. annual allocation and mechanism of award, including criteria, bidding processes (if any), and regulatory approvals. Mechanism to ensure investment and efficiency improvement post privatisation: (a) determine commitments to be required from prospective investors - particularly investment in infrastructure and efficiency enhancement; to align with and support the Government’s privatization objectives and proposed transition in power market structures ; and (b) propose a mechanism to ensure that post-privatization, the required investments, efficiency gains, and service delivery improvements are effectively achieved. This should include considerations for enforceability, regulatory oversight, investor confidence, and balanced risk allocation.

Copyright Business Recorder, 2025