KARACHI, Oct 10 (Reuters) - Pakistan's government has

reached an agreement with utilities to end power purchase

contracts, including one with Pakistan's largest private utility

that should have been in place until 2027, as part of efforts to

lower costs, it said on Thursday.

The news confirms comment from Power Minister Awais Leghari

to Reuters last month that the government was re-negotiating

deals with independent producers to lower electricity tariffs as

households and businesses struggle to manage soaring energy

costs.

Prime Minister Shehbaz Sharif said on Thursday Pakistan has

agreed with five independent power producers to revisit

purchase contracts, which he said would save the country 60

billion rupees ($216.10 million) a year.

The need to revisit the deals was an issue in talks for a

critical staff-level pact in July with the International

Monetary Fund (IMF) for a $7-billion bailout.

Prior to the prime minister's announcement, Pakistan's

biggest private utility, Hub Power Company Ltd, said

the company agreed to prematurely end a contract with the

government to buy power from a southwestern generation project.

In a note to the Pakistan Stock Exchange, it said the

government had agreed to meet its commitments up to Oct. 1,

instead of an initial date of March 2027, in an action taken "in

the greater national interest".

A decade ago, Pakistan approved dozens of private projects

by independent power producers (IPPs), financed mostly by

foreign lenders, to tackle chronic shortages.

But the deals, featuring incentives, such as high guaranteed

returns and commitments to pay even for unused power, resulted

in excess capacity after a sustained economic crisis reduced

consumption.

Short of funds, the government has built those fixed costs

and capacity payments into consumer bills, sparking protests by

domestic users and industry bodies.

Pakistan has begun talks on re-profiling power sector debt

owed to China and structural reforms, but progress has been

slow. It has also said it will stop power sector subsidies.