Pakistan’s investment environment needs to see a turnaround before the privatisation of DISCOs becomes yet another topic where regulators, inconsistent policymaking, and frequent changes are routinely singled out as the issues for failed results.
This issue also has implications for Pakistan’s broader power-sector reform and privatisation agenda. The privatisation of distribution companies remains an ongoing process, with IESCO, GEPCO and FESCO among the utilities being considered at the current stage. Expressions of interest have already been received from Turkish investors including Aktor Elektrik Enerji, Genvera Enerji and Cengiz Enerji, while a number of local investors and consortiums have also expressed interest alongside them. The experience of K-Electric hence, assumes wider relevance as Pakistan seeks to attract private sector participation in its electricity distribution sector.
Back in May 2025, NEPRA had issued its decision based on which it allowed a per unit utility tariff of PKR 39.97 against the requested PKR 44.69. Various stakeholders, including the Power Division, expressed their dissatisfaction and filed a review motion. Following several closed door hearings again, NEPRA decided to backtrack its previous determination despite extensive deliberations worth 2.5 years and announced a revised tariff decision of PKR 32.37, showcasing a drastic cut worth PKR 7.6. It also raises questions about the regulator’s decision-making capability and whether the determination in May was wrong and this being right, or vice versa.
KE’s Multi-Year Tariff (MYT) is designed to provide a regulatory framework that gives the utility visibility over its costs, revenues and investment requirements over a defined period. By establishing key cost and revenue components in advance, the MYT enables utilities to plan for anticipated growth in electricity demand and make long-term investments in generation, transmission and distribution infrastructure. It also provides greater clarity on the cost of electricity provision, allowing utilities to develop revenue models and plan for future operational expenditure. The mechanism also includes working capital requirment, operations and maintenance (O&M), energy, transmission and distribution costs, retail margin and the applicable recovery loss allowance. For a vertically integrated utility such as KE, the framework is therefore central to long-term financial and operational planning.
The distinction between the utility tariff and the tariff ultimately paid by consumers is important: the MYT does not, in itself, alter the consumer-end tariff, which remains uniform across Pakistan. The utility-end tariff therefore should not be conflated with the tariff charged to consumers.
The issue surrounding the tariff, where K-Electric has admitted financial non-viability in its notice to the PSX, has wider implications. The situation also raises questions for investors seeking visibility on the long-term sustainability of privatised power entities in Pakistan.
The tariff revision has already created an annual gap of around Rs. 100 billion, with the potential for this gap to increase further. As per estimates, every Rs. 1 reduction in KE’s tariff would translate into an incremental annual loss of approximately Rs. 15 billion.
The financial implications extend beyond the utility’s balance sheet. Insufficient cash flows could affect the company’s ability to meet its financial obligations and maintain the continuity of fuel and power supplies. Potential implications of breaches of debt covenants, including the triggering of Material Adverse Event clauses, which could restrict cash collection and affect it’s the company’s ability to service or raise future debt.
Investment is particularly important in a power system where demand is expected to grow alongside the wider economy. Every 1% increase in Pakistan’s GDP requires a corresponding 1.25% increase in electricity supply. From this perspective, discouraging investment in the power sector could constrain the infrastructure and capacity required to support future economic growth.
For KE, some estimates suggest that almost 500 of its more than 2,100 feeders have high losses because of power theft and low recoveries. For an unplanned city with widespread slums encroaching over 50% geographic area, without an economically viable framework, continued investment and electricity supply could become increasingly difficult. At the same time, insufficient provision for operations, maintenance and generation costs could contribute to increasing faults and affect the quality and reliability of power supply especially considering rapid corrosion given the city being along the coastal belt.
The MYT is not simply a matter of determining a number on a tariff notification. It is intended to provide the financial and regulatory visibility required for a utility to maintain infrastructure, invest for future demand and sustain reliable electricity supply. The resolution of KE’s FY23/30 tariff will consequently have implications not only for its own financial position and investment programme, but also for investor confidence and the wider trajectory of power-sector privatisation in Pakistan.
And this is not it, the power policies of the 90s resulted in power plants that added to the capacity charges imbedded in consumers’ utility end tariff as well, with a share of over 60% with the remaining being the energy purchase price. The rate incurred in Pakistan are among the highest in South Asia. To further add misery, rapid solarization added to the capacity trap, while it was beneficial for those installing solar panels, it affected grid customers with Rs. 3 per unit parked in their bills. Had the net metering policy not been revised in February 2026, the additional burden on the grid was ascertained to be Rs. 628 billion in the coming decade. The Ministry following ongoing calculations and extrapolation applied this correction which will now move grid customers and prosumers on a somewhat balanced trajectory.
For any company aiming to invest in the power sector of Pakistan, the past baggage cannot be ignored, meanwhile what lies ahead needs to be put on a straight path.
