Power IPP 1HFY26 Results: PPA Changes Squeeze Hub Power and KAPCO Revenue

Pakistan's independent power producers, the private companies that generate electricity and sell it to the grid, are living through a reset of how they get paid. The government has been ending or reworking old power purchase agreements, the long term contracts that guaranteed payments, and the first half FY26 results show that change biting into revenue. Hub Power and KAPCO both saw their core income shrink, though each had a cushion.

What the power producer results showed

Hub Power, the largest listed IPP, reported profit of Rs25.62 billion for the half year ended 31 December 2025, down about 1 percent, with earnings per share of Rs17.16 against Rs17.99 a year earlier. The striking number was revenue, which fell 28 percent to Rs34.12 billion. That drop came mainly from the early termination of the Hub plant's power purchase agreement and the renegotiation of Narowal Energy's tariff, both of which cut income from its own plants. What held profit up was Rs21.3 billion of income from associates and ventures, the stakes Hub Power holds in other businesses, up about 6 percent. The board declared an interim dividend of Rs5 per share, on top of Rs5 already paid.

KAPCO told a different version of the same story. Its profit fell about 57.5 percent to Rs826.8 million, with earnings per share down to Rs0.94 from Rs2.21. The silver lining was that the plant earned revenue again, about Rs4.27 billion, after a prior period when it sat under preservation with effectively no income. KAPCO announced its results on 27 February 2026 and declared a Rs1.5 per share dividend.

Why PPA reform matters for power stocks

For years, IPPs ran on capacity payments, money they received for being available to generate whether or not the power was used. As the government renegotiates and ends these deals to ease the cost of electricity and the wider circular debt problem, the guaranteed income that underpinned IPP earnings shrinks. That is why revenue can fall sharply even when a plant still runs. Companies with other income streams, like Hub Power's stakes in associates, are better placed to absorb the hit than pure play generators.

Which stocks, and why

Hub Power reads as neutral. Profit held roughly flat, which is a credit to its diversification, but the 28 percent revenue fall from PPA changes is a real structural shift in its core business, so the steady profit masks a moving picture. KAPCO is also neutral, for the opposite reason: profit fell sharply, but the plant returning to generation after preservation is an operational positive that offsets some of the earnings decline. Both are smaller, transitional reads rather than clear positives or negatives.

What to watch

The key theme is how far the PPA overhaul goes and what each company replaces the lost capacity income with. For Hub Power, watch the contribution from associates and any new projects, since that is now doing the heavy lifting. For KAPCO, watch whether the restarted plant can run profitably under the new arrangements. Progress on circular debt also matters, because it affects how reliably any of these producers actually get paid.