Nepra gets IPPs’ input on LIBOR to SOFR shift for power projects

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) received feedback Thursday from Independent Power Producers (IPPs) about Pakistan’s transition from the London Interbank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR) for power projects with foreign financing.

This move comes in response to LIBOR’s discontinuation on June 30, 2023. Most power producers have expressed a preference for using term SOFR.

The transition aligns Pakistan’s financial practices with global standards and ensures that both legacy and new contracts use the more robust and reliable SOFR.

The power regulator has initiated a suo moto proceeding to oversee this transition, ensuring that all relevant power projects adapt effectively to the new benchmark rate while maintaining financial stability. Nepra directed 72 power projects having full or partial foreign financing to file tariff modification petitions by June 12, 2024. However, only two IPPs—Harappa Solar (Private) Limited and Gharo Solar Limited—complied. In response to pressure from the Pakistan Wind Energy Association and development financial institutions (DFIs), Nepra expedited the transition through suo moto proceedings.

Nepra on Thursday held a public hearing in which various IPPs participated who had sought the power regulator’s determination for an alternative index to replace LIBOR.

During these proceedings, it was reported that 53 power projects submitted written confirmations, with 11 choosing Daily SOFR, 37 opting for Term SOFR, and three requesting both options for different loans. Two IPPs—Uch-II Power (Private) Limited and Laraib Energy Limited—requested extensions of synthetic LIBOR for their remaining debt terms of 1.5 and one year, respectively.