Companies reluctant to engage in second phase of CPEC

As the first Phase of China Pakistan Economic Corridor (CPEC) comes to a completion and a more comprehensive second phase is underway the new investing companies are not showing much enthusiasm in it.

This is mainly due to Pakistan not being able to honour the terms and conditions set with the previous companies especially in the Power sector. The Chinese companies which have established power projects in Pakistan under CPEC maintain that whatever agreements were signed should be honoured in letter and spirit and on a sustainable basis instead of raising the same issues again and again.

The bone of contention is payments being overdue which is discouraging new investors. An estimate suggests that the total overdue amount for Chinese power companies stands at Rs220 billion for which the representatives of these companies visit Power Division time and again and write letters requesting payment, but are not getting an encouraging response from the relevant authorities.

Sources close to the matter suggest that the government may opt for the same formula used to pay other IPPs i.e. in two instalments, 40 per cent and 60 per cent. Although the Payments are being made for energy and liability of lenders but the main issue is payment of return on equity without which then they cannot possibly declare dividends.