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BANKING

Pakistan: Picking over the power puzzle

These are nervous times for investors in Pakistan's power sector, which has attracted around $3 billion since 1994. Allegations that agreed tariffs were set too high and that several of the 18 independent power projects (IPP) that have achieved financial closure involved illegal gifts to members of Benazir Bhutto's government have prompted Nawaz Sharif's administration, which took office in February, to scrutinize terms and conditions.

Claims that sponsors, many foreign, are making exorbitant profits and a prediction by the new minister for water and power, Chaudhry Nisar, of looming overcapacity have added to the sense of urgency. So too has the poor financial condition of the state utilities, the Water&Power Development Authority (Wapda) and Karachi Electricity Supply Company (Kesc), which pay for IPP power.

A review committee set up by in April was due to report this month. Its brief: "all aspects of the agreements which the former government entered into with the private power project owners". But the government has said it stands by international agreements and tariff renegotiation will be made with "mutual consent" of IPP sponsors.

Sources in Islamabad towards the end of last month suggested the committee appeared to have retreated from a unilateral tariff reduction.

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