Pakistan power sector and its production in July 2026

AHL Research has published a report on the Pakistan Power Sector and its production in July 2026, which shows a strong recovery; higher FCA persists.

Jul’26: Power generation up 7.1% YoY

Power demand showed a meaningful recovery in Jul’26, rising 7.1% YoY to 15,122 MW, and standing 2.3% above the seven-year July average. While still below the 15,678 MW peak recorded in Jul’21, the rebound is encouraging for power-sector activity and broader economic growth.
Power generation exceeded the NEPRA reference, in our view, aided by lower tariffs, a shift of industrial consumers to the national grid, an incremental consumption package for industrial and agricultural consumers and improved economic activity (LSM up 5.8% YoY in 11MFY26). Generation exceeding the reference level also bodes well for future QTAs.
Adjusted fuel cost in Jul’26 stood at PKR 9.61/KWh, higher than the reference cost of PKR 7.09/KWh. Consequently, DISCOs have sought a positive FCA of PKR 2.52/kWh for Jul’26 (the highest since Jun’24), driven by a higher RLNG and furnace oil mix, including reliance on spot RLNG cargoes, while higher oil prices further increased costs.
FO-based generation surged 115% MoM to 200 GWh in Jul’26 due to RLNG disruptions and higher summer demand. However, NPL, NCPL, and NEL are expected to see significant utilization, supporting earnings for companies operating under the hybrid take-and-pay regime.
LNG-based power generation declined 33.2% YoY to 1,629 GWh in Jul’26, reflecting a sharp reduction in LNG imports amid geopolitical disruptions. Of the seven long-term cargoes originally scheduled for the month, none were imported by PSO under its long-term contract. However, PLL imported five spot cargoes at a 20.1% DES slope, driving the RLNG fuel cost to PKR 47.38/kWh (the highest on record), and contributing to the higher FCA.

Jul’26: Cost of power generation up 38.1% YoY

Notably, RLNG and FO together accounted for 54% of the unadjusted fuel cost, contributing PKR 5.10/kWh and PKR 0.71/kWh, respectively, out of the total PKR 10.75/kWh.
Hydel generation reached a record 6,019 GWh in Jul’26, up 6% YoY and 32% above the long-term July average of 4,560 GWh, marking the highest July output ever. The sustained improvement in hydel generation, supported by stronger water availability, is increasingly strengthening the low-cost generation mix, providing some relief to overall generation costs and FCA.
Coal-based generation reached 3,819 GWh in Jul’26, up 44% YoY and the highest level for any Jul, driven by a sharp 90% YoY increase in imported-coal generation to 2,169 GWh, while local coal generation rose 10% YoY to 1,650 GWh. The surge in coal generation reflects a continued shift toward coal-based generation amid reduced RLNG availability and elevated LNG costs while higher power demand, with imported coal alone accounting for ~57% of total coal generation in Jul’26. This increasing reliance on coal, alongside robust hydel output, helped offset expensive thermal generation.
Generation trends from Dec’25 to Mar’26 indicated improving grid stability, supported by a PKR 4/kWh reduction in industrial tariffs, targeted incentive packages, and higher levies on captive gas consumption. While softer demand in 4QFY26 posed a near-term risk to this momentum, the rebound in Jul’26 generation is encouraging, offering a positive signal for the power sector and broader economic activity. NEPRA currently projects power demand growth of 1.0% YoY for CY26.

Courtesy – AHL Research