Govt to Pay the outstanding debt of Rs. 300 billion owed to Chinese independent electricity producers (IPPs) in July with the Chinese Foreign Minister relocating to Pakistan.
The matter was discussed by China’s Charge d’Affaires recently along with SAPM Coordination Syed Tariq Fatemi, who later wrote to the division of power inquiring about the status of the payments. The Chinese power companies have claimed that the outstanding costs have amounted to $1.5 billion.
Chinese companies are apprehensive about the current situation at their power plants in Hub, Sahiwal, and Port Qasim. They also complain about currency exchange restrictions, which cause problems in exporting coal. Businesses claim that the inability to pay could cause the power plants to fail, which could lead to the suspension of operations. Pakistan, however, came up with a different solution to address issues of capacity payment in the long term.
Pakistan has offered to sell 1200 MW of electricity to China to supply electricity to Afghanistan. The government has also asked to renew the contract per other IPPs that can be expected to save $14.26 billion over the life of these plants, which amounts to $0.48 billion annually for an average that is 30 years.
Although Pakistan is expected to be in a surplus of 3970 MW by 2030, based on the current power balance and renewal of the agreement can impact the validity of contracts signed under CPEC, particularly when the Chinese recognize that the demands will originate via Western Financial Institutions.