ISLAMABAD: The Power Division has requested Prime Minister Shehbaz Sharif to personally witness the signing of agreements with 18 banks for raising Rs1.225 trillion in loans aimed at partially retiring the power sector’s circular debt, which currently stands at around Rs1.7 trillion, down from Rs2.5 trillion, official sources confirmed.
All codal formalities for the massive financing package have been completed. The boards of Discos, the Central Power Purchasing Agency-Guarantee (CPPA-G), Power Division, and Finance Division have cleared the agreements, while all requisite documents and guarantees are now in place.
Sources clarified that the Rs1.225tr figure is based on the quarterly instalment cap of Rs310m, structured over six years at Kibor minus 9pc. Had the government opted for a higher cap of Rs325m per quarter, the total would have risen to Rs1.275tr — but at the cost of a higher Debt Servicing Surcharge of Rs3.23/kWh, deemed politically untenable.
Of the total financing, Rs659bn will go towards retiring loans owed by Power Holding Limited (PHL). The government has yet to decide on allocation of the remaining funds, whether for payments to power producers, the petroleum sector, or subsidy adjustments.
Once signed, the government will have 30 days to request disbursements, which must be utilised promptly to avoid penalties. Officials said the government intends to use the disbursements to test which independent power producers (IPPs), including Chinese investors, are willing to offer discounts on outstanding dues.
18 banks on board
The syndicate includes Meezan Bank, HBL, NBP, Allied Bank, UBL, Faysal Bank, Bank Al Habib, MCB, Bank Alfalah, Dubai Islamic Bank, Bank of Punjab, Bank Islami, Askari Bank, Habib Metropolitan, Al Baraka, Bank of Khyber, MCB Islamic, and Soneri Bank.
Cabinet approvals
The federal cabinet has already cleared the framework with minor amendments, authorising CPPA-G (on behalf of Discos) to execute the Circular Debt Restructuring, Settlement and Subscription Agreement (CDRSSA) with the government. Key approvals also include:
Settlement of Rs683bn PHL debt.
Immediate release of Rs267bn already budgeted under Power Division’s equity demand.
A supplementary grant of Rs393bn for CPPA-G.
Utilisation of proceeds to clear dues of government-owned power plants and Uch-I & Uch-II projects.
Disbursements to IPPs contingent upon waiver of Late Payment Interest (LPI).
Legislative amendments in the Finance Bill 2025-26 to support the financing structure.
Officials said the signing ceremony is likely to be held at the Prime Minister’s Office with Shehbaz Sharif in attendance.
Story by Mushtaq Ghumman
