ISLAMABAD: AsiaPak Investments Limited has sought the government’s support for a proposed export-oriented aluminium smelter in the Port Qasim industrial area, targeting annual exports of more than USD5 billion at full development, alongside a long-term power supply arrangement linked to a conditional waiver of USD90 million in late payment interest (LPI) owed by the Central Power Purchasing Agency-Guarantee (CPPA-G) to Port Qasim Electric Power Company (Private) Limited (PQEPCL).
In a letter dated September 23, 2026, addressed to different ministries and SIFC, AsiaPak Chairman Shaheryar Chishty proposed a package combining a dedicated power supply arrangement for the smelter with settlement of the longstanding LPI dispute between PQEPCL and CPPA-G.
The company has proposed that the arrangement be restricted to export-oriented industries exporting more than 90 percent of their output, subject to the requisite policy and regulatory approvals.
According to the proposal, more than 90 percent of the aluminium smelter’s production would be exported, generating annual exports exceeding USD5 billion once the project reaches full development. The project is also expected to support downstream industrial investment and employment.
AsiaPak has requested the Ministry of Industries and Production to convene a joint working group involving the Power Division, CPPA-G, PQEPCL, relevant system and network operators, and the company’s project team to finalise the commercial arrangements, financial model and settlement documentation.
The company has proposed November 30, 2028, as the effective date for the back-to-back power purchase agreement, subject to completion of the required approvals and documentation.
Under the proposed arrangement, the smelter would enter into a back-to-back power purchase agreement with CPPA-G, with electricity delivered at the terminals of PQEPCL’s existing power plant.
AsiaPak has argued that this arrangement would be the most practical and implementable option among the power supply and contractual structures it has examined, while preserving PQEPCL’s existing power purchase agreement with CPPA-G.
Under the proposal, the smelter would pay CPPA-G the entire capacity purchase payments (CPP) relating to the full capacity of PQEPCL’s plant under the existing power purchase agreement, together with the applicable energy purchase price (EPP) for all electricity generated and delivered at the agreed metered delivery point.
These payments would be made against an enforceable entitlement to the corresponding capacity and electricity, according to the letter.
The company has proposed that all capacity and energy payments be deposited into a designated collection account. PQEPCL would have the contractual right to draw its corresponding dues from this account under an agreed account mandate and payment waterfall to be documented among CPPA-G, PQEPCL, the smelter and the account bank.
Amounts drawn by PQEPCL would discharge CPPA-G’s corresponding obligations under the existing power purchase agreement to the same extent, thereby preventing double recovery.
The proposal also provides that PQEPCL’s existing agreement with CPPA-G would not be novated. Instead, supplementary provisions would be introduced to address metering, dispatch, allocation of electricity, settlement arrangements and operation of the collection account.
Availability, outages and non-delivery would also be expressly addressed to align the smelter’s supply entitlements with its payment obligations.
AsiaPak has further proposed that the smelter arrange and bear the cost of a dedicated transmission line and evacuation infrastructure, including applicable transmission losses beyond the plant-terminal delivery point.
The company has described the arrangement as fiscally neutral for CPPA-G, arguing that the smelter would assume the plant’s capacity-payment burden through the collection account, while the energy purchase price would be recovered against the corresponding generation cost.
No new tariff subsidy or additional sovereign guarantee has been proposed under the arrangement.
A central component of the proposal is the conditional settlement of the longstanding LPI dispute between PQEPCL and CPPA-G.
AsiaPak has stated that, on the proposed settlement basis of USD150 million, PQEPCL would waive 60 percent, equivalent to USD90 million, subject to its written agreement, definitive documentation and the requisite corporate and lender approvals.
However, the proposed waiver would become effective only if three conditions were fulfilled by October 31, 2026.
First, CPPA-G would have to pay the remaining 40 percent of the agreed LPI amount, equivalent to USD60 million, to PQEPCL in full and in cleared funds, without deduction or set-off except as expressly agreed in the settlement agreement.
Second, CPPA-G would have to clear 100 percent of all other outstanding receivables payable to PQEPCL, excluding the agreed LPI amount. These receivables would be reconciled and recorded in a schedule attached to the settlement agreement.
Third, the proposed smelter power supply arrangement would have to receive all necessary approvals for implementation, including approval of the back-to-back power purchase agreement with an effective date of November 30, 2028.
The letter makes clear that an approval in principle would not be sufficient if material terms or essential permissions remained unresolved, unless PQEPCL expressly agreed otherwise in writing.
The settlement agreement would also specify the cut-off dates for LPI and other receivables, the treatment of subsequent accruals, the required approvals and the evidence necessary to demonstrate fulfilment of the conditions.
AsiaPak has proposed that the 60 percent waiver lapse if any of the three conditions remains unfulfilled by October 31, 2026, unless the deadline is extended in writing.
Any payment received would be credited against CPPA-G’s liabilities as agreed, but would not independently trigger the waiver. The release would cover only the agreed LPI amount, with other rights and obligations under the existing power purchase agreement remaining intact.
Consequently, the proposed USD90 million concession is not an unconditional waiver. Its implementation depends on CPPA-G arranging the required payments, clearing other receivables and securing the necessary approvals for the proposed power supply arrangement within the stipulated timeframe.
AsiaPak has estimated that the proposed arrangement could provide a substantial financial benefit to CPPA-G through the combination of the LPI waiver and recovery of capacity payments from the smelter.
The company’s indicative calculation is based on the full net tariff capacity of 1,242.95 megawatts (MW) of PQEPCL’s plant and an estimated annual post-debt capacity payment of USD169.34 million at the tariff inputs used in its calculation.
The estimate applies a derived capacity-payment rate of Rs4.3321 per kilowatt-hour, an exchange rate of Rs278.55 per dollar and excludes debt servicing and Sinosure costs.
According to the company’s calculations, the USD90 million LPI waiver, combined with estimated capacity-payment recovery over a 20-year scenario, would produce a total indicative benefit of approximately USD3.477 billion.
The breakdown provided in the letter is as follows:
LPI waiver: USD90 million.
Estimated annual post-debt capacity purchase payments: USD169.34 million.
Estimated capacity payments over 20 years: USD3.38675 billion.
Total indicative benefit over the 20-year scenario, including the waiver: USD3.47675 billion.
AsiaPak has emphasised that this calculation is an illustration based on current tariff inputs rather than a guaranteed saving under the existing power purchase agreement.
The company has acknowledged that the estimate assumes current tariff inputs remain unchanged over the 20-year period and is undiscounted. Actual payments would remain subject to approved indexation, plant availability and contractual terms.
The letter also notes that the existing tariff period and the plant’s commercial operation date (COD) of April 24, 2018, imply an indicative contractual end date around April 2048, subject to confirmation of the contractual terms.
On that basis, AsiaPak has provided a separate term-capped illustration of approximately USD3.375 billion, including the LPI waiver, by limiting the calculation to April 24, 2048. A full 20-year capacity-payment scenario beginning November 30, 2028, would require an agreed extension, according to the proposal.
The company has also stated that the final financial model would need to verify plant availability and the enforceable contractual term before the arrangement could be implemented.
The proposal distinguishes between the potential financial benefit of the arrangement and the cash that CPPA-G would need to arrange to settle its existing obligations.
According to AsiaPak, CPPA-G would need to pay USD60 million towards the agreed LPI settlement by October 31, 2026, in addition to paying all other outstanding receivables owed to PQEPCL, the amount of which remains to be reconciled.
The company has clarified that these payments would discharge existing liabilities and should not be counted as additional savings under the proposed arrangement.
Similarly, matched energy receipts have been excluded from the estimated benefit calculation.
AsiaPak has maintained that the proposed structure would not create unrecovered incremental costs for CPPA-G, as capacity payments would be funded by the smelter through the designated collection account and energy costs would be recovered against the corresponding electricity supplied.
However, the proposed fiscal neutrality and estimated benefits remain subject to final commercial arrangements, regulatory approvals, contractual entitlements and verification of the financial model.
The company’s annexure provides the basis for its post-debt capacity-payment estimate, drawing on published NEPRA decisions rather than a fresh determination of the tariff that would apply when the proposed supply arrangement begins in 2028.
AsiaPak has referred to the latest capacity indexation it identified, dated July 17, 2026, for the July-September 2026 quarter. It has stated that subsequent fuel adjustments do not, by themselves, establish a new capacity purchase payment rate.
The derived rate of Rs4.3321 per kilowatt-hour comprises fixed operation and maintenance costs, jetty fixed operation and maintenance costs, normalised working capital, return on equity and an insurance component.
The company has described certain components, including working capital and return on equity, as provisional. It has also carried forward an insurance adjustment from November 2025 solely as a planning assumption, noting that future insurance costs would be adjusted to approved actual costs.
The estimate uses the plant’s net capacity of 1,242.95 MW rather than its gross capacity of 1,320 MW. It assumes payment for the full net capacity over 8,760 hours annually before contractual availability deductions; the assumption is not a generation load-factor estimate.
AsiaPak has further excluded debt-service and Sinosure costs from its post-debt calculation, stating that actual debt discharge and any rescheduling would need to be confirmed before the proposed arrangement commenced.
These qualifications indicate that the projected benefit is dependent on the final tariff applicable to the plant, the duration of the enforceable capacity-payment arrangement, contractual availability deductions and the treatment of outstanding financing obligations.
AsiaPak has requested the Ministry of Industries and Production to convene a joint working group comprising the Power Division, CPPA-G, PQEPCL, relevant system and network operators and the company’s project team.
The proposed group would finalise commercial terms, the collection account mechanism, the financial model and settlement documentation, while coordinating the necessary approvals with NEPRA’s engagement where required.
The company has sought coordination of the requisite approvals by October 31, 2026, to meet the proposed deadline for the conditional LPI waiver and enable the back-to-back power purchase agreement to take effect on November 30, 2028.
The proposal thus links a major export-oriented industrial investment with the settlement of an existing power-sector liability. Its implementation would require the relevant parties to agree on the commercial structure, verify the projected financial benefits, settle outstanding receivables and obtain all necessary regulatory and corporate approvals.
Copyright Business Recorder, 2026