Port Qasim Electric Power Company Limited (PQEPC) has issued a stark warning to the Government of Pakistan (GoP), threatening to suspend operations of its 1,320 MW coal-fired power plant if the outstanding payments owed to the company are not cleared immediately. Liang Yongbin, the Chief Executive Officer (CEO) of PQEPC, raised this issue in a letter addressed to Finance Minister Muhammad Aurangzeb and other relevant authorities.
A Crucial Component of CPEC: The 1,320 MW Port Qasim Coal-Fired Power Project
The Port Qasim Power Plant, established under the China-Pakistan Economic Corridor (CPEC), is a key initiative aimed at delivering clean, reliable, and economical electricity to Pakistan’s national grid. The project has been instrumental in controlling circular debt and reducing reliance on imported fuel sources. However, despite its importance, the plant is now facing severe financial strain due to delayed payments. As of September 27, 2024, the total amount owed to the company had reached Rs. 88.2 billion ($317 million), with some payments delayed by over six months.
Discontent Among Foreign Stakeholders
The shareholders and sponsors of the project, from China and Qatar, have expressed significant dissatisfaction with the ongoing payment delays. According to the CEO, the current financial situation entitles PQEPC to suspend operations under the terms of the Power Purchase Agreement (PPA) without incurring Liquidated Damages. Yongbin stressed that the suspension of plant operations would be detrimental for both sides and urged the GoP to take immediate action to settle the outstanding dues.
Comparative Advantages and Looming Crisis
PQEPC has highlighted that its power plant offers a competitive advantage in terms of Energy Purchase Price (EPP) compared to oil and LNG power plants. Therefore, any disruption in its operations would not only exacerbate Pakistan’s energy crisis but would also lead to a financial loss for both parties. The CEO warned that failure to resolve the issue could result in a Loan Agreement Default and a Sovereignty Guarantee Default for the GoP.
Finance Ministry’s Involvement and Qatar’s Concerns
The Finance Ministry has already been involved in addressing the issue of delayed payments to PQEPC and other CPEC-related Independent Power Producers (IPPs). In fact, the former Prime Minister of Qatar, Sheikh Hamad Bin Jasim Bin Jaber Al Thani, had previously written to the Government of Pakistan, requesting the timely clearance of payments, citing Qatar’s 49% shareholding in the Port Qasim Power Plant. Despite these appeals, the outstanding dues remain unresolved.
Back-to-Back Meetings for Debt Restructuring and Conversion to Domestic Coal
In light of the financial challenges, PQEPC’s team has been actively engaging with authorities in Islamabad to explore various options, including debt restructuring, loan extensions, and the potential conversion of the plant to run on domestic Thar coal. These discussions are aimed at reducing the plant’s reliance on imported coal, thereby improving its financial sustainability and easing pressure on the country’s foreign exchange reserves.
Immediate Action Required to Prevent Shutdown
The company has emphasized the urgency of the situation, urging the authorities to provide financial support to the Central Power Purchasing Agency-Guaranteed (CPPA-G) to clear the outstanding dues as soon as possible. Failure to do so could result in the shutdown of the power plant, further complicating Pakistan’s already fragile energy sector.
The Finance Ministry has acknowledged the severity of the issue, noting that the total payables of CPPA-G to CPEC-IPPs stood at Rs. 477 billion as of June 2024, with Rs. 82 billion owed to the Port Qasim Power Plant alone. While some payments were made prior to the Prime Minister’s visit to China in May 2024, the outstanding amount remains significant, requiring urgent resolution to prevent further escalation.
Conclusion
As Pakistan faces an escalating energy crisis, the timely resolution of payment issues with the Port Qasim Electric Power Company is crucial. Both the GoP and the relevant authorities must act swiftly to ensure that the power plant continues to operate, providing much-needed electricity to the national grid while avoiding a detrimental shutdown that could have far-reaching consequences for the country’s energy sector.
