World Bank unit and other lenders criticise Pakistan s energy negotiations

Karachi - Pakistans unilateral renegotiation of clean power contracts will undermine investor confidence and be detrimental to the long-term future of the sector, a group of eight development finance institutions said.

Pakistan said last year it was renegotiating contracts with independent power producers to rein in unsustainable electricity tariffs.

The World Banks International Finance Corporation, the Asian Development Bank, the Islamic Development Bank and five other institutions said in a letter that Pakistan was renegotiating wind and solar power contracts with independent producers to bring down energy costs in a non-consultative manner.

The move will be detrimental to the long-term development of the sector, undermining investor confidence and discouraging much-needed future private investment, the institutions said in the letter, seen by Reuters and sent to the countrys finance and power ministers, and the prime ministers energy advisor.

The Financial Times, which first reported on the letter dated February 18, said last month that power contract renegotiations were being led by the countrys powerful military.

The militarys media wing did not respond to a request for comment.

No MILITARY COERCION

The prime ministers advisor on power, Muhammad Ali, denied military coercion in the governments renegotiations with power plants, calling discussions very cordial and amicable.

Ali assured lenders they wont be affected, thanks to the governments sovereign guarantee. He also noted that some wind plant owners may have misled lenders about the financial impact of the renegotiation, and announced plans for a forensic audit of some plants due to suspected inflated costs.

The International Finance Corporation declined to comment, while the Islamic Development Bank didnt immediately respond. A source at the Asian Development Bank confirmed the letter, declining official comment.

In the letter, the institutions said they had invested around $2.7 billion in the clean energy sector over the past decade and