• In Sep’25, power generation increased by 0.8% YoY, reaching 12,592 GWh, compared to 13,179 GWh in Aug’24. During 1QFY26, generation totaled 40,933 GWh, up 1% from previous year.
• However, on a MoM basis, the power generation saw a decrease of 11.4%, which is largely due to seasonality.
• The slight rise in September’s power generation was driven by lower tariffs, captive consumers shifting to the grid after levy imposed on captive, and a low base from Sep’24 (lowest September generation since Sep’17).
• Adjusted fuel cost in Sep’25 stood at PKR 7.29/KWh, lower than the reference cost of PKR 7.66/KWh.
• Consequently, DISCOs have requested a negative FCA of PKR 0.37/kWh, primarily due to lower than expected oil prices and a reduced FO share in power generation compared to NEPRA’s reference. NEPRA had assumed Brent crude at USD 73/barrel, whereas actual prices averaged USD 68/barrel during Sep’25.
• Notably, the fuel cost for imported coal-based generation stood at PKR 13.74/kWh, down 17.2% YoY due to a decline in imported coal prices. The cost gap between imported and Thar coal narrowed to just PKR 0.74/kWh, compared to the historical average difference of around PKR 4/kWh.
• Hydel and nuclear generation came in lower than NEPRA’s reference, while RLNG and imported coal output rose sharply.

 Outlook

• RLNG based generation decreased significantly 11.0% YoY at 1,815 GWh in Sep’25. Moreover, it remained 12.9% above the Sep’25 reference target, leading to increased fuel costs but was partially offset by lower oil prices, leading to the negative FCA.
• Hydel based generation declined slightly 1.1% YoY at 4,823 GWh in Sep’25, likely due to lower hydel flows. Moreover, it remained 1.2% below the Sep’25 reference target.
• Imported coal-based generation declined 11.3% YoY to 1,019 GWh in Sep’25. However, it remained 72% above NEPRA’s reference, likely due to its improved position on the merit order amid lower imported fuel costs.
• Power generation in Sep’25 stood 5.3% below the reference level of 13,300 GWh, which remains concerning despite lower tariffs and the shift of captive power consumers to the grid.
• The surplus has accumulated to 708 GWh, with actual generation witnessed at 12,592 GWh.
• Power generation in Oct’25 is expected to decline due to seasonal factors, particularly lower temperatures, while hydel output may remain constrained this year amid reduced water flows. Looking ahead, NEPRA projects power demand to grow by 2.8% YoY in FY26.
• As a result of lower generation for hydel sources, generation from expensive fuel sources is expected to rise, resulting in higher fuel cost and hence positive FCA’s.

Courtesy- AHL Research