Chinese IPP Opposes One-Year Limit on Coal Deals

Port Qasim Electric Power Company (PQEPC) has raised concerns over a proposed one-year restriction on coal supply contracts, arguing it could impede fuel supply, complicate procurement and heighten risks for coal-fired power stations. In submissions to the Central Power Purchasing Agency-Guarantee (CPPA-G), the firm contested a suggestion to benchmark coal procurement discounts across tenders, asserting that differences in supplier bids do not inherently signify wrongdoing.

PQEPC operates a 1,320 megawatt coal power plant. It stated its imported coal purchases adhered to approved tariff, generation, power purchase and implementation agreements with the government. The company argued procurement rules could not supersede these contractual and regulatory agreements unless explicitly included. PQEPC contended that tenders cannot be compared based solely on headline discounts because they vary in terms of volume, contract length, payment currency, delivery methods, coal quality demands and performance assurances.

They dismissed the use of discount rates from \$0.20 to \$7.12 per metric ton as grounds for punitive action. The \$7.12-per-ton discount mentioned by the Power Division pertained to an unexecuted contract with a performance bond of roughly Rs. 5 million, which the company deemed insufficient given its own financial exposure requirements, making it an unsuitable reference point.

PQEPC also questioned the continued use of past discount figures from Indonesian coal as a permanent benchmark, citing stricter quality requirements and supply constraints. It noted a 23.34 percent year-on-year drop in Indonesia’s seaborne coal shipments in August 2026, along with reported supply and logistical hurdles. The company argued that suppliers could charge more for coal meeting new quality standards and that discount changes should not automatically be seen as proof of misconduct.

It also emphasized that variations in bids from independent power producers could reflect different contract terms, quantities and risk levels. Defending its reliance on backup suppliers, PQEPC argued that negotiating coal at a lower discount than the one offered under a primary supply contract might be necessary if the main supplier falls short.

Such practices, the company claimed, shield power plants from fuel shortages, capacity payment reductions and liquidated damages under power purchase agreements. Opposing the proposed one-year contract duration, PQEPC noted that international coal miners and shipping firms typically do not engage in short-term supply agreements without significant minimum purchase commitments.

It also cautioned that mandatory annual re-bidding could limit the time for board, shareholder and regulatory approvals. PQEPC blamed the CPPA-G’s failure to meet minimum annual energy payments for the lack of guaranteed coal purchases. It noted that monthly fuel price adjustments already enable NEPRA to evaluate procurement expenses.

The company backed holding defaulting suppliers accountable but called for proper procedures, hearings and exemptions for force majeure and other uncontrollable events. PQEPC stressed its responsibility for fuel supply risks, its lack of return on fuel expenditures, and reimbursement of verified expenses through tariffs. It cited a $0.58 loss per metric ton in its most recent fuel price adjustment and Rs.

1.62 billion under spot coal procurement guidelines. The company urged the government and CPPA-G to evaluate procurement based on project agreements, reject allegations of irregularity based solely on differing tender discounts, reassess the one-year contract limit, and incorporate safeguards in supplier-default regulations. PQEPC also proposed that a government agency assume responsibility for procuring and supplying coal to power plants, citing NEPRA’s June 22, 2026, recommendations.