ISLAMABAD: With Rs565 billion now available following a landmark Rs1,225 billion financial arrangement with 18 commercial banks, the authorities are preparing to initiate fresh negotiations with seven China-Pakistan Economic Corridor (CPEC) coal-based Independent Power Producers (IPPs) to settle long-standing liabilities.
The move is part of a broader strategy to stabilise the country’s power sector and reduce the mounting circular debt. Out of the total Rs1,225 billion raised, Rs660 billion has been allocated to clear debt parked in the Power Holding Company (PHL). The remaining Rs565 billion will be used to make payments to seven Chinese coal-fired IPPs, established under the 2015 Power Policy, as well as to 49 wind and solar power plants.
According to official sources, the government is seeking a waiver of Rs170 billion in late payment interest (LPI) from the Chinese coal-based plants. This request mirrors the successful renegotiation with local IPPs, who agreed to waive Rs377 billion in LPI. Talks with the CPEC IPPs had previously stalled, as Chinese operators declined to waive surcharges. However, with liquidity now available, authorities hope to resume negotiations under more favourable conditions.
The total outstanding dues to the seven CPEC coal-based IPPs currently stand at Rs320 billion, comprising Rs150 billion in principal and Rs170 billion in LPI. Authorities have already disbursed Rs100 billion, when the total dues previously stood at Rs420 billion. They now seek a full waiver of the Rs170 billion LPI, leaving Rs150 billion to be paid in principal—if negotiations succeed.
In parallel, the government is holding talks with 49 wind and solar IPPs—with a combined generation capacity of around 2,500 MW. If successful, these negotiations could result in a Rs31 billion LPI waiver, with the government clearing Rs49 billion in principal dues. Officials involved in the process described the renewable IPP talks as “tough and complex,” citing the involvement of foreign and multilateral lenders in many of the financing arrangements. Despite the complexity, a majority of companies have reportedly shown flexibility and a willingness to settle under the government’s terms. “Those who agree to the government’s terms will be paid after deducting the LPI,” a senior official said. “Those who do not accept the revised terms may face a forensic audit of their accounts.”
The government has already cleared all dues owed to local IPPs and state-owned power plants, while nuclear and hydropower generation, already cost-effective, remains outside the scope of this restructuring effort. As Pakistan pushes to bring fiscal discipline and reform to its power sector, the outcome of ongoing talks—with both CPEC coal plants and renewable IPPs—will be critical. A successful resolution would mark a major step forward in restoring investor confidence, reducing circular debt, and ensuring long-term energy sector sustainability.