Pakistan’s fragile energy sector is hurtling toward a systemic crisis as Chinese power producers operating under the China-Pakistan Economic Corridor (CPEC) demand the immediate clearance of Rs498 billion in mounting overdue payments.
The massive liquidity shortfall at the state-run Central Power Purchasing Agency-Guarantee (CPPA-G) now threatens to trigger sovereign guarantee defaults and disrupt baseload power generation across the national grid. With CPPA-G facing severe financial constraints, the crisis has escalated to the Prime Minister’s Office as foreign operators warn of an impending collapse of their financial sustainability.
The debt accumulation heavily impacts major baseload infrastructure, specifically two massive 1,320-megawatt coal-fired power plants. Port Qasim Electric Power Company (PQEPC), the operator of one of these critical facilities, has formally escalated the crisis after waiting more than six months for arrears to be cleared.
In a formal communication issued on September 29, Wang Dongfeng, Chief Executive Officer of PQEPC, directed a stark warning to Pakistan’s ministers for finance, planning, and energy.
“Continued delays could disrupt the project’s financial sustainability and lead to defaults under loan agreements and the government’s sovereign guarantee.”
According to the executive’s letter, PQEPC’s outstanding receivables had swelled to Rs79 billion—equivalent to $285.4 million—by the end of September. The sustained non-payment has triggered deep concerns among the company’s Chinese and Qatari shareholders, who are demanding an immediate settlement to meet their own debt obligations.
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PQEPC has formally petitioned the federal government to arrange direct financial support for CPPA-G, arguing that without state intervention, the purchaser cannot clear the liabilities. The operator noted that its energy purchase price tariff remains significantly lower than competing oil-based and re-gasified liquefied natural gas (RLNG) power plants, making its uninterrupted generation vital for the national grid.
A parallel crisis is unfolding at the 1,320-megawatt Sahiwal coal-fired power plant, where operator China Huaneng is battling the state over approximately Rs80 billion in outstanding receivables.
| CPEC Power Entity | Installed Capacity | Outstanding Receivables | Current Status / Dispute |
| Total CPEC Power Sector | N/A | Rs498 billion | Systemic CPPA-G liquidity shortfall |
| Sahiwal Coal Power Plant (China Huaneng) | 1,320-megawatt | Rs80 billion | Four-year dispute over “capacity payment deductions” |
| Port Qasim Electric Power Company (PQEPC) | 1,320-megawatt | Rs79 billion | Approaching sovereign default; payments delayed >6 months |
The Sahiwal dispute extends beyond simple non-payment. China Huaneng has repeatedly sought intervention from the Prime Minister’s Office to resolve a highly contentious, four-year deadlock with CPPA-G over aggressive “capacity payment deductions.”
The conflict has severely strained bilateral corporate relations, with China Huaneng alleging that Pakistani government authorities have applied sustained pressure on the company to accept a coerced “give-and-take” arrangement as a mandatory condition for releasing the long-withheld capacity payments.
As the government attempts to facilitate payments to independent power producers across the board, the immense scale of the CPEC-specific debt threatens to overwhelm state finances and breach international loan covenants.
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