Pakgen Power Enters New Phase as PPA Ends, What Lies Ahead?

Pakgen Power Limited (PKGP) has officially entered a new chapter in its corporate journey. With the early termination of its Power Purchase Agreement (PPA) and a strong liquidity position, the company is gearing up for strategic transformation, one that could reshape its role in Pakistan’s evolving energy landscape.

Here’s what investors need to know from PKGP’s latest corporate briefing session.

PPA termination and settlement: a smooth exit

Originally set to expire in October 2028, PKGP’s PPA was mutually terminated early on January 31, 2025, under a Negotiated Settlement Agreement. As part of the deal, the Central Power Purchasing Agency (CPPA-G) agreed to pay all outstanding receivables, Capacity Purchase Price, Energy Purchase Price, and Past Tariff Invoices, amounting to PKR 11.51 billion. These payments were fully received by April 30, 2025, significantly boosting PKGP’s cash position.

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While delayed interest payments were waived, the company clarified that CPPA-G remains liable to reimburse any future tax obligations, should the Federal Board of Revenue (FBR) rule in its favor.

Earnings slide, but gross profit stays resilient

In CY24, PKGP’s revenues fell by 46% year-over-year to PKR 11.3 billion, down from PKR 20.8 billion in CY23. This sharp decline was due to reduced dispatches and lower energy sales following the phased shutdown.

Despite this, gross profit held steady at PKR 5.35 billion, only marginally lower than PKR 5.69 billion last year. This resilience came from significant cost reductions in fuel and operations.

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Net profit stood at PKR 4.47 billion, down 24% YoY from PKR 5.86 billion. Earnings per share (EPS) clocked in at PKR 12.01, compared to PKR 15.76 a year earlier.

Liquidity boost and post-PPA strategy

As of December 31, 2024, PKGP reported a surplus fund position of PKR 6.73 billion, a healthy buffer that could support new investments and dividend payouts. The timely recovery of PKR 11.51 billion in receivables further strengthened the company’s balance sheet heading into 2025.

Now, without a PPA in place, PKGP retains full ownership of its 350MW oil-fired power plant located in Mehmood Kot. According to management, the plant remains operationally intact and can begin generating electricity for new buyers once regulatory approvals are secured.

The company plans to enter the Competitive Trading Bilateral Contract Market (CTBCM), targeting bulk power consumers through wheeling agreements with distribution companies.

Cost optimization and new ventures ahead

PKGP is streamlining operations through:

• Voluntary Severance Schemes (VSS) to rationalize workforce
• Maintenance cost optimization
• Exploration of new income streams and business verticals

Management is actively considering alternate revenue sources, though specific sectors were not disclosed. This suggests a willingness to diversify beyond traditional power generation.

A strategic shift with opportunities and uncertainties

With its PPA officially behind it, PKGP is transitioning from a regulated, fixed-revenue model to a more dynamic, market-based structure. While this shift brings challenges—such as price volatility and competition, it also presents new opportunities for innovation, cost control, and growth in a liberalized power market.

With a strong cash reserve, a functioning plant, and new markets opening up under CTBCM, PKGP may be well-positioned to redefine its future.

Source: Taurus Securities Limited

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →