Following the discussions between Pakistan’s Minister for Power Awais Leghari and Chinese Ambassador Jiang Zaidong, the Power Division, with support from the Finance Division, is expected to present a final proposal to Prime Minister Shehbaz Sharif for full implementation of power sector debt re-profiling with Chinese independent power producers (IPPs) in the coming days, Business Recorder, citing sources.
Currently, the Central Power Purchasing Agency-Guaranteed (CPPA-G) owes around Rs475 billion to Chinese CPEC IPPs.
The government is seeking a waiver on the Late Payment Surcharge (LPS) from Chinese IPPs, who have asked Pakistan to take the matter up with Beijing, as they are not authorised to decide on it.Â
According to the news report, Prime Minister Sharif, during his visit to China for the Shanghai Conference later this month, is expected to raise the issue with top Chinese officials. Minister for Planning, Development and Special Initiatives Ahsan Iqbal, who heads CPEC affairs, is finalising a list of priorities for the Prime Minister.
The Power and Finance Divisions are coordinating with around 18 commercial banks to disburse Rs1.275 trillion to retire circular debt, reducing it from Rs1.614 trillion to roughly Rs330 billion. Most of the loans are aimed at settling dues of Chinese IPPs, with the government seeking a discount on LPS similar to other IPPs. This move is expected to affect the balance sheet of Power Holding Limited (PHL).
Under the proposed arrangement, Rs1.225 trillion in loans would be parked in CPPA-G. The plan assumes a base loan of Rs660 billion for PHL in FY25, with an additional Rs565 billion to be availed from commercial banks. Circular debt of Rs2.4 trillion is planned to be refinanced over six years at lower rates, serviced by a Debt Service Surcharge (DSS) of Rs3.34 per kWh. The surcharge cap may be removed as per IMF agreements to cover any collection gap.
The Cabinet approved the transaction on June 18, 2025. Sixteen bank documents have been received, while five are pending. The Power Division team is finalising the remaining documents, with the package expected to be executed by August 15 or next week, and drawdown to be completed within 90 days of execution.
As of June 30, 2025, the Power Division has secured Rs260 billion in LPS waivers, with Rs76 billion still under negotiation, including nuclear (Rs32 billion), RLNG (Rs17 billion), Uch (Rs8 billion) and miscellaneous items (Rs19 billion).
The division has also signed revised settlement agreements with 42 power projects, terminating contracts for six. Tariff renegotiations have been completed for 16 thermal power plants, nine bagasse-fired plants, four GPPs/RLNG, two Gencos, and six nuclear power plants, with reductions applied through QTAs.Â
Negotiations are ongoing with 34 projects, including hydel, SHPs, CPEC, Korean, DFC Wind, and WAPDA’s Neelum Jhelum hydropower project expected to become operational in two years.
