‘Give-and-take’ arrangement: Chinese firm accuses authorities of forcing it to accept their conditions

ISLAMABAD: M/s China Huaneng, the Chinese company that owns and operates the 1,320-MW Sahiwal coal-fired power plant, has reportedly accused Pakistani authorities of pressuring it to enter into a “give-and-take” arrangement as a condition for clearance of its long-pending capacity payment deductions, well-informed sources in the Planning Ministry told Business Recorder.

The company’s Chief Executive Officer Liu Zengrui has approached the Prime Minister’s Office (PMO) and other relevant authorities, including the Central Power Purchasing Agency-Guarantee (CPPA-G), which purchases electricity from the plant and makes payments to the company, seeking intervention to resolve the issue.

“The power company has sought intervention of the Prime Minister’s Office regarding a long-standing and critical issue faced by it in connection with CPPA-G, which has remained unresolved for approximately four years despite repeated efforts by the company to have the matter addressed through the appropriate institutional process,” the sources quoted the CEO as saying.

According to the company, the Sahiwal power plant has played an important role in Pakistan’s power sector since becoming operational by supplying electricity to the national grid, supporting economic activity, generating employment and contributing to the country’s energy security.

The project was established under the sovereign framework provided by the Government of Pakistan and, according to the company, remains fully operational and committed to serving Pakistan.

The CEO reportedly informed the PMO that during FY2022-23, the plant suffered capacity deductions due to circumstances beyond the company’s control.

At that time, Pakistan was facing severe foreign-exchange reserve constraints, which prevented the company from making timely payments to its international coal suppliers. As a consequence, the company faced difficulties in procuring the required quantity of coal, resulting in reduced generation availability and consequential capacity deductions.

The company has maintained that the situation was not caused by operational negligence or failure on its part but resulted from extraordinary foreign-exchange constraints prevailing in the country, which affected the ability of power projects to make payments to overseas suppliers.

A similar issue, according to the company, was faced by another CPEC power project under comparable circumstances.

Subsequently, the case of the other CPEC power project was considered by the competent authorities, including the Economic Coordination Committee (ECC), and its capacity payments were approved and released.

The company considers this to be an important precedent for addressing capacity deductions arising from extraordinary foreign-exchange and coal-supply constraints affecting CPEC power projects.

“For nearly four years, the Sahiwal Power Plant has been making continuous efforts with CPPA to have its case processed in accordance with the established precedent,” the CEO was quoted as saying.

The company has repeatedly requested CPPA-G to place the matter before its Board so that, after requisite approval, the long-standing issue could be resolved.

“Regrettably, despite these repeated requests, the matter has not progressed in a satisfactory manner,” the CEO said.

More concerning, the company has reportedly been informed by concerned CPPA officials that progress on its capacity-deduction claim was being made conditional upon its agreeing to certain other matters or options unrelated to the circumstances that gave rise to the deductions.

“In substance, the company has been presented with a ‘give-and-take’ arrangement whereby its capacity-deduction issue would allegedly be processed only if it agrees to certain other conditions, failing which the matter would remain unresolved,” the CEO was quoted as saying.

The company argues that its claim, arising from a specific and extraordinary national-level foreign-exchange crisis, should be examined independently, transparently and on its own merits.

It has further argued that linking resolution of the issue with unrelated matters places the company in an extremely difficult position and does not appear consistent with the treatment afforded to the similarly situated CPEC power project whose case has already been resolved by the competent authorities.

The power company has requested the PMO to intervene and direct the relevant authorities, particularly CPPA-G, to consider and process the Sahiwal Power Plant’s capacity-deduction issue independently and on its own merits, without linking it to unrelated matters or conditions.

It has also requested that CPPA-G be directed to place the company’s case before its competent Board or authority without further delay so that the matter can proceed through the prescribed governmental process.

The company further sought consideration of its case in light of the precedent established for the similarly affected CPEC power project, particularly where the underlying circumstances were substantially comparable.

It has also requested that the matter be dealt with fairly, transparently and professionally, without making resolution of its legitimate claim conditional upon unrelated commercial or contractual matters.

Meanwhile, insiders said the Energy Task Force was making all-out efforts to secure discounts from Chinese IPPs on the pattern of arrangements being sought from other independent power producers (IPPs). However, both the Chinese government and Chinese IPPs were reportedly not taking these efforts seriously.

“Chinese government is asking Islamabad to approach IPPs for any discount, whereas the IPPs claim that they have nothing to do with the matter and Pakistani authorities should seek help from the Chinese government,” an insider said.

The development comes at a time when the government is seeking concessions from power producers to reduce the financial burden on the power sector, while Chinese IPPs continue to maintain that contractual and sovereign obligations should be dealt with through the prescribed institutional mechanisms.

Copyright Business Recorder, 2026