Discos' sell off: ‘Turkish model' under consideration

Business Recorder

16 hours ago

ISLAMABAD: Pakistan is dispatching a delegation to Turkiye to study its model for the privatisation of power distribution companies (Discos), aiming to reduce losses, attract investment, and improve operational efficiency, 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 2025.
The plan involves engaging transaction advisors for long-term concessions, potentially adopting the Turkish model, which has demonstrated notable improvements in private sector participation, service quality, and loss reduction in Turkiye.
In the second phase, Lahore Electric Supply Company (LESCO), Multan Electric Power Company (MEPCO), and Hazara Electric Supply Company (HAZECO) will be offered for privatisation.
Meanwhile, Hyderabad Electric Supply Company (HESCO), Sukkur Electric Power Company (SEPCO), and Peshawar Electric Supply Company (PESCO) will be offered under a concessional model. The Tribal Areas Electric Supply Company (TESCO) and Quetta Electric Supply Company (QESCO) will be retained for improvement and later offered through management contracts.
Discos' sell-off/provincialisation: PMO directs Power Div. to expedite consultations
At a recent meeting, Prime Minister Shehbaz Sharif directed the Power Division to invite a Turkish delegation to Pakistan for follow-up discussions after the completion of the Pakistani delegation's visit to Turkiye.
The sources said, FAs shared update on following Condition Precedents (CPs): (i) notify licence eligibility criteria rules; (ii) notify licence eligibility regulations; (iii) notify separate performance standards for distribution and supply (from existing standards); (iv) notify power acquisition/ power procurement regulations applicable to suppliers; (v) modify and notify tariff rules to address uniform tariff; (vi) modify current tariff guidelines to accommodate distribution licencee and supplier of last resort; (vii) clarify subsidies for Nepra consideration and in notifying tariffs; (viii) notify guidelines on how Discos can request and recover subsidies; (ix) clean up Discos' balance sheets; (x) complete the process for issuance of shares in Discos; (xi) develop future mechanism for timely payments against government dues (TDS, FATA/ AJK, etc); (xii) as per requirement of National Electricity Policy (NEP), efficient tariff structures for Discos may be awarded and Discos target may be revisited as stated in NEP; (xiii) as per requirement of NEP, the strategic road maps entailing commercial performance milestones may be developed for each Disco; (xiv) as per NEP, the anti-theft initiatives and recovery systems may be institutionalized in each Disco with support of law enforcement agencies and provincial governments; (xv) there are various off-balance sheet liabilities of Discos which need to be recognised as per applicable financial and corporate reporting legal requirements; (xvi) define eligibility criteria for customers who can choose their supplier; (xvii) licence regime of Discos is due to be changed after expiry of their existing validity till 2022 safeguarding the wire and retail business of Discos; (xviii) CTBCM is due to be effective soon impacting the exclusivity of Discos in their existing service jurisdictions; and (xix) a confirmed timeline may be provided for full implementation of CTBCM.
'The work of privatisation is going on and our Advisor, Alvarez & Marsal Middle East, has given the sectoral due diligence report which is being reviewed by Power Division, Petroleum Division, along with Nepra and CPPA-G. There are number of regulatory and policy issues that need to be sorted out so that there is no issue at a later stage. So, the Working Group and all these people are working on it very closely. At the same time, due diligence is also progressing,' said a senior official of Privatisation Commission.
A couple of weeks ago, Power Division has also given a detailed briefing to the representatives of development partners including the World Bank on the updated status of privatisation of Discos.
According to sources, development partners have been informed that Privatisation Commission is on track on the privatisation process of three Discos in first phase.
According to a Finance Ministry's Report of first half of FY 2025, some Discos have posted huge financial losses. Quetta Electric Supply Company and Sukkur Electric Power Company had losses of Rs58.1 billion and Rs29.6 billion, respectively, with accumulated losses of Rs770.6 billion and Rs473.0 billion, underscoring chronic inefficiencies and poor recoveries in the distribution segment. Peshawar Electric Supply Company with Rs19.7 billion loss (Rs684.9 billion accumulated)
The total core operating actual loss for the period stands at Rs283.7 billion, with notable contributors including Qesco Limited (Rs92.65 billion loss), Pesco Limited (Rs53.68 billion), and Hyderabad Electric Supply Company (Hesco) Limited (Rs39.63 billion).
Even Discos with positive Earnings Before Interest and Taxes (EBIT) and subsidy removal—such as Multan (EBIT Rs8.4 billion), Faisalabad (Rs52 billion), and Gujranwala (Rs20.9 billion)—turned loss-making after adjusting for subsidies, incurring actual losses of Rs35.17 billion, Rs13.12 billion, and Rs7.32 billion, respectively. Lahore, Islamabad, Sukkur, and Tribal Discos also showed EBIT gains or marginal losses but failed to stay profitable post-adjustments. Particularly, alarming is Quetta DISCO, with an EBIT loss of Rs60.36 billion and additional subsidies of Rs 32.30 billion still leaving a staggering net loss.
Copyright Business Recorder, 2025