The government of Pakistan has decided to clear the outstanding dues of Rs. 300 billion, owed to Chinese independent power producers (IPPs) in July with the Chinese Foreign Minister visiting the country.

The issue was raised by China’s Charge d’ Affairs recently with SAPM on Coordination, Syed Tariq Fatemi who later wrote to the power division inquiring about the payments. The Chinese power companies claim the overdue payments have reached $1.5 billion.

Chinese businesses are highly concerned about the situation with their power plants at Hub, Sahiwal, and Port Qasim also complaining about currency exchange restrictions, causing difficulty in coal import. Companies claim that the non-payment can potentially cause the plants to default, ultimately suspending operations. Pakistan on the other hand, had a different proposal to settle the issue of capacity payments in the long term.

Pakistan has offered to sell 1200-MW electricity to China for onward supply to Afghanistan. The government has also requested to renegotiate the contracts per other IPPs which can reportedly save $14.26 billion for the life of these plants, or $0.48 billion per year for an average project life of 30 years.

While Pakistan is likely to have a surplus of 3970 MW by 2030 per the current power balance, the renegotiation can affect the sanctity of contracts signed under CPEC especially when the Chinese realize that the requests will be actually coming from Western Financial Institutions.

Source: Pro Pakistani