ISLAMABAD: Pakistan has launched an international investment campaign to attract foreign investors for the privatization of three major power distribution companies (DISCOs)—Islamabad Electric Supply Company (IESCO), Faisalabad Electric Supply Company (FESCO), and Gujranwala Electric Power Company (GEPCO). However, concerns over delayed payments to Chinese Independent Power Producers (IPPs) under the China-Pakistan Economic Corridor (CPEC) are expected to dominate discussions with prospective investors.
A high-level delegation led by the Prime Minister’s Adviser on Privatisation, Muhammad Ali, has begun the outreach initiative with a visit to Türkiye and is scheduled to continue engagements in China and Saudi Arabia to promote investment opportunities in Pakistan’s power distribution sector.
Speaking to Business Recorder, Muhammad Ali acknowledged that the unresolved payment issues with Chinese IPPs could pose a significant challenge in attracting fresh investment.
“I seriously considered whether it was the right time to approach Chinese investors when existing power producers are facing payment delays,” he said. “Nevertheless, we have decided to move forward by assuring investors that outstanding dues can be adjusted against future payments to government entities.”
Ali emphasized that the privatization process would be designed to protect investor interests through transparent and bankable transaction structures.
“Privatisation cannot succeed unless investors are fully confident that their investments are secure. Our objective is to provide that confidence through carefully structured transactions,” he added.
According to official estimates, the Central Power Purchasing Agency-Guaranteed (CPPA-G) currently owes nearly Rs560 billion to Chinese IPPs, primarily due to persistent inefficiencies, low bill recovery, and the growing circular debt burden within the power distribution system.
Government sources revealed that Islamabad has proposed a settlement mechanism under which Chinese IPPs would offer payment discounts similar to those accepted by other IPPs. The proposal would facilitate the clearance of outstanding dues through a Rs1.225 trillion financing facility arranged with 18 commercial banks.
While CPPA-G has already utilized part of the financing to settle certain liabilities, a substantial portion remains pending because Chinese IPPs have so far declined to accept discounted payments.
Officials familiar with the negotiations said Chinese power companies maintain that any financial restructuring requires approval from authorities in Beijing and have advised Pakistan to pursue the matter directly with the Chinese government.
Pakistan has also raised the issue of power purchase agreement revisions during recent discussions with Chinese officials in Beijing. However, little progress has been achieved, with both government representatives and Chinese IPPs reportedly deferring responsibility to one another.
“There has been no meaningful breakthrough on contract reviews, as both sides continue to shift responsibility,” a senior government official said.
Earlier proposals to reschedule loans obtained by Chinese IPPs to extend repayment periods and reduce financial pressure are also being reassessed, as policymakers believe changing market conditions may limit the effectiveness of such measures.
The issue was discussed during the recent visit of Finance Minister Senator Muhammad Aurangzeb and Power Minister Sardar Awais Ahmad Khan Leghari to Beijing. Despite high-level engagements, both sides have yet to reach a comprehensive agreement.
As Pakistan advances its privatization agenda for the power distribution sector, industry experts believe the government’s ability to resolve payment disputes, reduce circular debt, and provide long-term contractual certainty will be critical to securing investor confidence and ensuring the successful sale of the three DISCOs.
Story by Mushtaq Ghumman
