ISLAMABAD: The government has accelerated efforts to privatise three major power distribution companies (discos) — Islamabad Electric Supply Company (IESCO), Gujranwala Electric Power Company (GEPCO) and Faisalabad Electric Supply Company (FESCO) — with officials confident that the divestment process will be completed in the second half of the current calendar year.
Senior sources told this correspondent that the Privatisation Commission was currently working on transactional structuring of the three entities, alongside key regulatory adjustments aimed at facilitating a smooth sell-off. A central element of the restructuring involves redefining the role of the sector regulator, the National Electric Power Regulatory Authority (Nepra), particularly by limiting its discretionary powers while maintaining its oversight and regulatory mandate.
According to officials, the proposed framework seeks to make the assets more attractive to investors without compromising regulatory supervision. Under the new model, the privatised discos will not be allowed to claim returns on assets in the traditional manner. Instead, they will earn returns based on approved investment plans and performance-driven, efficiency-based key performance indicators (KPIs), including reductions in transmission and distribution losses and improvements in bill recoveries.
“The objective is to incentivise efficiency rather than asset accumulation,” a senior official said, adding the boards of the privatised entities would be empowered to approve investment plans tied to clearly defined recovery and loss-reduction targets. Nepra, however, will retain oversight of these plans and KPIs. While the regulator will continue to supervise compliance and sector standards, it will not be allowed to minutely examine or re-approve investment decisions after an initial five-year period.
Authorities are also working on safeguards to ensure that privatised discos do not evolve into monster of Independent Power Producers (IPPs) in the future, a move seen as critical to maintaining structural clarity in the power market and preventing vertical integration concerns.
The government has held consultations with leading business groups in Karachi and Lahore to gauge investor appetite. Representatives of major conglomerates and energy players — including Hub Power Company (Hubco), Lucky Cement, Arif Habib Group, Sapphire Group, Fatima Fertiliser and Nishat Group — have shown interest in acquiring stakes in the distribution companies.
However, potential investors have reportedly emphasised the need for regulatory predictability, particularly seeking a clear curtailment of Nepra’s discretionary powers beyond core regulation and oversight.
In parallel, the government is pursuing a different model for two other loss-making distribution companies — Sukkur Electric Power Company (Sepco) and Hyderabad Electric Supply Company (Hesco). Instead of outright privatisation, these entities are likely to be handed over to private operators under long-term concession agreements. Officials said work on structuring these management contracts was progressing at pace.
The privatisation drive is part of broader reforms aimed at improving efficiency in the power distribution segment, reducing circular debt and attracting private capital into the energy sector. With investor engagement under way and structural adjustments being finalised, authorities say they remain optimistic that the divestment of Iesco, Gepco and Fesco will materialise within the targeted time-frame.
