Pakistan Tackles Power Sector Debt With $1.25 Trillion Financing Deal

Islamabad: Pakistan is set to sign a landmark financing agreement worth approximately $1.25 trillion to address its crippling power sector circular debt. The signing ceremony is scheduled for tomorrow, September 24, 2025, at the Prime Minister’s Office, with the Prime Minister attending virtually from the United States.

The substantial loan, secured from banks, aims to restructure existing debt of roughly $683 billion held by Power Holding Limited (PHL) at KIBOR plus 2%. The remaining $567 billion will be utilized to settle dues owed to nuclear, RLNG, coal, and other power generation facilities.

This move seeks to replace older, high-interest debt and reduce late payment penalties to independent power producers (IPPs), which currently range from KIBOR plus 2% to 4.5%. The funds will be recouped through an existing surcharge of Rs3.23 per unit on electricity consumers.

Several listed companies are poised to gain from this agreement. Oil and Gas Development Company Limited (OGDC) anticipates receiving $80 billion from Uch Power Plant, with potential indirect benefits through Sui Northern Gas Pipelines Limited (SNGPL). Pakistan Petroleum Limited (PPL) is also likely to see positive impacts.

Pakistan State Oil (PSO) stands to benefit from the resolution of outstanding receivables from LNG power plants through SNGPL. On the coal front, major listed entities like Hub Power Company (HUBC), Lucky Cement (through Lucky Electric), Fauji Fertilizer Company (FFC), and Thal Limited, stakeholders in coal power plants, are expected to profit, although negotiations with Chinese IPPs are ongoing.

This financial injection is viewed as a positive development for both the government and affected energy sector companies. The influx of liquidity is projected to enable companies to reduce their debt burdens and allocate resources for business expansion, such as exploration or shareholder payouts.

The agreement is also anticipated to pave the way for resolving the gas circular debt, which would be highly advantageous for OGDC, PPL, PSO, and Mari Petroleum Company Limited (MARI). Discussions regarding this resolution are currently underway.