Investors Want More Guarantees Before Buying Power Companies

Investors have expressed strong interest in the government's planned privatization of three power distribution companies but say they will submit bids only if the government provides longer tariff guarantees, regulatory certainty, and greater operational freedom.

The concerns were outlined in an investor feedback report prepared for the Privatization Commission following roadshows in Pakistan, Türkiye, Saudi Arabia, and China for the proposed sale of Faisalabad Electric Supply Company (Fesco), Gujranwala Electric Power Company (Gepco), and Islamabad Electric Supply Company (Iesco).

The report found that investors want the multi year tariff regime extended from the current five years to between seven and 10 years, arguing that a longer tariff framework is necessary to support investment in electricity distribution infrastructure. They also called for a gradual shift from the uniform tariff system to company specific tariffs linked to each distribution company's performance and efficiency.

Investors also raised concerns over regulatory uncertainty, warning that future governments or court decisions could alter agreed tariff structures or contractual terms. They urged the government to provide legal safeguards, finalize capital expenditure plans before bidding, and ensure timely tariff decisions by the power regulator.

The report also highlighted demands for greater ownership flexibility, with many investors seeking full ownership of the utilities and permission to acquire stakes in more than one distribution company, subject to competition safeguards. Some investors suggested the government retain a minority stake in Iesco because of its large base of government consumers.

Investors further called for the freedom to purchase electricity from competitive suppliers and opposed transferring costly legacy independent power producer obligations to privatized utilities.

They also identified new revenue opportunities through telecom infrastructure, electric vehicle charging, and smart metering, while seeking clear rules on revenue sharing.

The report also flagged delayed government subsidy payments, particularly those related to Azad Jammu and Kashmir, as a major cash flow risk. Foreign investors additionally raised concerns over exchange rate risks on overseas borrowing and dividend repatriation.

According to the report, investor interest in the planned sale of Fesco, Gepco, and Iesco remains strong, but competitive bidding will depend on whether the government addresses these concerns before the privatization process moves to the next stage.

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