ISLAMABAD: Pakistan’s delegation, led by the Prime Minister’s Adviser on Privatisation, Muhammad Ali, has embarked on an international outreach campaign to market the privatisation of three major power distribution companies (DISCOs). However, the team is likely to face tough questions from potential Chinese investors, particularly in light of the ongoing payment issues faced by Chinese Independent Power Producers (IPPs) established under the China-Pakistan Economic Corridor (CPEC).
The delegation, which visited Turkey earlier this week, is now scheduled to travel to China and Saudi Arabia as part of a broader strategy to attract foreign investment in the privatisation of Islamabad Electric Supply Company (IESCO), Faisalabad Electric Supply Company (FESCO), and Gujranwala Electric Power Company (GEPCO).
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During an interaction with Business Recorder, Muhammad Ali acknowledged the concerns surrounding delayed payments to Chinese IPPs and admitted that the issue could complicate efforts to attract fresh investment. Responding to a question on how the government plans to reassure Chinese investors amid growing apprehensions, he said he had carefully deliberated whether a visit to China would be appropriate under the prevailing circumstances.
“I seriously considered whether it was the right time to approach Chinese investors when existing power producers are facing payment delays,” Ali said. “However, we have decided to proceed and provide the necessary comfort to investors by ensuring that their outstanding dues can be adjusted against future payments to government entities.”
He emphasised that privatisation transactions would be structured in a way that safeguards investor interests. “Privatisation cannot move forward unless investors are fully confident that their investments are secure. We intend to provide that assurance through careful and transparent transaction structuring,” he added.
According to official estimates, the Central Power Purchasing Agency-Guaranteed (CPPA-G) currently owes approximately Rs 560 billion to Chinese IPPs, largely due to inefficiencies and low recovery rates within power distribution companies. The mounting circular debt continues to be a major challenge for the government and a key concern for investors.
Sources revealed that the government has proposed that Chinese IPPs offer discounts similar to those extended by other IPPs, enabling settlement of outstanding dues through a Rs 1.225 trillion financing facility arranged with 18 commercial banks. While CPPA-G has already drawn a portion of the funds to clear some liabilities, a significant amount remains undisbursed, contingent upon the willingness of Chinese IPPs to accept the proposed terms.
However, progress on this front has been limited. Officials familiar with the matter stated that Chinese power companies have shown reluctance to accept any discount arrangement, citing the fact that their financial decisions are overseen by authorities in Beijing. They have advised Pakistani officials to engage directly with the Chinese government for any meaningful resolution.
At the same time, Pakistani authorities have raised the issue of contract renegotiations during recent engagements with Chinese counterparts in Beijing. Yet, according to insiders, there has been little headway, as both Chinese officials and representatives of IPPs in Pakistan appear to be deferring responsibility to each other.
“There is a clear lack of progress on contract reviews, with both sides passing the buck,” said a senior official.
Earlier, the government had explored options to reschedule loans of Chinese IPPs to extend repayment tenures and ease financial pressure. However, sources indicate that policymakers are now reassessing this approach, as changing ground realities may limit the effectiveness of such measures.
The issue of outstanding payments and broader power sector reforms was also discussed during a recent visit to Beijing by Finance Minister Senator Muhammad Aurangzeb and Power Minister Sardar Awais Ahmad Khan Leghari. Despite these high-level engagements, a comprehensive resolution remains elusive.
As Pakistan moves ahead with its privatisation agenda, the success of the initiative will largely depend on its ability to address investor concerns, particularly those related to payment security and contractual stability in the power sector.
Copyright Business Recorder, 2026
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