The government is considering political-risk guarantees backed by multilateral agencies to attract bidders for the disco privatization Pakistan has promised under its power-sector reform programme. The move comes as prospective local and foreign investors, now carrying out due diligence on the first batch of power distribution companies, demand stronger protection against future contractual disputes.
Why bidders are wary
The unease centres on contracts being reopened after privatisation. According to a Dawn report, the recent renegotiation of independent power producers’ contracts and legal developments around K-Electric‘s multi-year tariff have raised risk perceptions among investors.
Prospective bidders have asked for binding legal guarantees, a clearer allocation of financial risks and longer licence terms than the existing twenty-year period. Investors want assurance that the terms on which they buy a distribution company cannot be altered after the deal is signed.
The concerns have also put the spotlight on Muhammad Ali, the Prime Minister’s Adviser on Privatisation, who led the renegotiation of IPP contracts during the PTI and PML-N governments. Ali now heads the Privatisation Commission overseeing the Disco sales.
K-Electric dispute sharpens the debate
The row over K-Electric’s tariff shows why investors are nervous. The Sindh High Court has suspended recent decisions by the National Electric Power Regulatory Authority and its appellate tribunal concerning K-Electric’s multi-year tariff, which had effectively curtailed the federal government’s subsidy to the company, estimated at around Rs. 200 billion.
The court issued notices to the respondents and fixed the next hearing for October 15. For bidders, the episode is a live example of how regulatory decisions can shift after the fact.
Disco Privatization Pakistan: What Bidders Are Asking For
The government’s response has two tracks. First, it is weighing political-risk guarantees from multilateral agencies, a mechanism that would cover investors against losses arising from regulatory or policy changes. Second, it is pushing regulatory reforms to make the framework more predictable.
Finance Minister Muhammad Aurangzeb chaired a meeting of the Steering Committee on Power Sector Regulatory Regime and Reform Options on Wednesday to advance those reforms. The committee reviewed structural challenges including legacy capacity obligations, changing demand from growing solarisation, service quality and investment constraints.
Aurangzeb called for a market structure with clearer incentives for efficiency and service quality, along with greater competition, private-sector participation and investment.
The sale timeline at a glance
| Batch | Discos | Target completion |
|---|---|---|
| First | FESCO, GEPCO, IESCO | Jan to Mar 2027 |
| Second | HESCO, SEPCO | Apr to Jun 2027 |
| Third | PESCO, HAZECO, LESCO, MEPCO | Dec 2027 |
The first three Discos are already at the due-diligence stage, with prequalification complete or under way. QESCO is excluded from the plan despite posting some of the sector’s heaviest losses. According to the Finance Ministry’s Central Monitoring Unit, the ten Discos posted Rs. 299 billion in losses and absorbed another Rs. 551 billion in subsidies in fiscal year 2025.
The government has also assured the IMF it will sell nine Discos by December 2027, a commitment made during the fourth review of the Extended Fund Facility, for which a staff-level agreement was reached on October 8, 2026.
FAQ
What is the government offering bidders for Disco privatisation?
Political-risk guarantees backed by multilateral agencies, designed to shield investors from losses caused by future policy or regulatory changes, alongside accelerated regulatory reforms.
Why do investors want guarantees?
They fear contracts could be reopened after privatisation. The renegotiation of IPP contracts and the Sindh High Court’s suspension of Nepra’s K-Electric tariff decisions have raised perceptions of regulatory risk.
Who is leading the Disco privatisation?
The Privatisation Commission, chaired by Prime Minister’s Adviser on Privatisation Muhammad Ali, with Alvarez and Marsal as financial adviser.
Which Discos are being sold first?
Faisalabad (FESCO), Gujranwala (GEPCO) and Islamabad (IESCO), targeted for January, February and March 2027 respectively.
What is the deadline for the full sale?
The government has told the IMF it will sell nine Discos by December 2027. QESCO is not part of the plan.
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Originally reported by propakistani.pk.
