Pakistan energy sector manages new long-term power deals and capacity planning

Pakistan's energy sector is undergoing significant planning and contractual shifts. The Independent System and Market Operator (ISMO) has launched a data collection exercise for the Indicative Generation Capacity Expansion Plan (IGCEP) 2027. This 10-year planning horizon, covering 2027 to 2037, seeks project-specific data from provincial governments and stakeholders regarding thermal, hydropower, renewable, and hybrid power projects. This initiative proceeds despite the National Electric Power Regulatory Authority (Nepra) yet to formally notify the IGCEP 2025-35.

Simultaneously, the federal government has signed four new agreements with Independent Power Producers (IPPs) in 2025. This includes a 30-year deal with the Jamshoro Coal Power Plant, a move that occurs while the government is actively attempting to renegotiate or terminate costly power contracts to reduce the financial burden of capacity payments.

Capacity payments, which are charges paid to producers for maintaining available generation regardless of actual output, have seen a sharp increase. According to Energy Minister Sardar Awais Ahmad Khan Leghari, annual payments rose from Rs61,390 crore in 2020-21 to Rs1,80,700 crore in 2024-25. While the government has terminated six IPP agreements to save an estimated Rs4.3 lakh crores, the new long-term contracts highlight the ongoing complexity of managing the nation's power sector and circular debt.