Power sector set for over Rs1tr injection

April 17, 2025 (MLN): Eighteen commercial banks have signed a term sheet to restructure and inject funds worth over Rs1.25 trillion or $4.6bn into Pakistan’s struggling power sector, as the government seeks to contain mounting circular debt, as per individuals with direct knowledge of the negotiations.

The plan includes a rollover of Rs658 billion in existing liabilities through Pakistan Holding Company Limited (PHCL), previously settled via term finance certificates, along with a fresh loan disbursement of Rs617bn.

The proposal has now been submitted to the Ministry of Finance for final approval.

If cleared, the six-year financing arrangement will offer banks a return between 10.5% and 11%, benchmarked to the Karachi Interbank Offered Rate (KIBOR) minus 90 basis points.

To service the debt, electricity consumers will pay an additional Rs3.23 per unit as a debt servicing charge.

Funding contributions will be made based on banks’ 2024 audited accounts. National Bank of Pakistan is expected to contribute Rs98bn, Habib Bank Rs81bn, United Bank Rs68bn, and MCB Bank Rs58bn.

Al-Baraka Bank is projected to have the smallest share at Rs4.5bn.

The financing aims to address chronic cash flow constraints in the power sector, which is a longstanding structural issue undermining the country’s energy and fiscal stability.

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