Power Circular Debt Rises to Rs1.67 Trillion in FY26: HUBC, KAPCO, KEL, NPL Stocks in Focus

Pakistan's power sector circular debt climbed by Rs61 billion during FY26 to reach Rs1.67 trillion, with inefficiencies at the distribution companies, or Discos, cited as the biggest driver of the increase. Circular debt is the pile-up of unpaid dues that flows through the power chain: distribution companies collect less cash than they bill because of losses and theft, so they cannot fully pay the central power purchaser, which in turn falls behind on what it owes the generation companies that supply electricity to the grid.

What the Rs1.67 Trillion Power Circular Debt Figure Changed

The Rs61 billion increase means the unpaid dues owed across the power chain kept growing rather than shrinking in FY26, even after previous rounds of government intervention aimed at containing it. For a reader unfamiliar with the term, circular debt does not mean a company's profit disappears; it means the cash a company is owed for electricity it already supplied sits unpaid for longer, which strains its working capital and cash flow even when the underlying contract still guarantees eventual payment.

Why Power Generation Stocks Are in Focus

Independent power producers, or IPPs, sell electricity under long-term contracts and are paid partly through capacity payments regardless of how much power is actually dispatched. When circular debt grows, it is these capacity and energy payments that fall behind schedule, so IPPs end up financing a bigger gap between the electricity they have supplied and the cash they have actually collected. Hub Power, the country's largest IPP, has flagged that circular debt delays its cash flows even though its underlying capacity-payment model is not itself impaired.

Which Stocks, and Why

Kot Addu Power, a thermal IPP whose returns are largely tariff and capacity defined, carries similar circular-debt receivables on its books, so a rising national total adds to the dues it is waiting to collect. Nishat Power, a smaller Nishat-group IPP with a comparable regulated-returns structure, faces the same exposure. K-Electric, Karachi's vertically integrated utility, sits on both sides of the chain since it both buys and sells power, and its multi-year tariff and recovery dynamics make it sensitive to how quickly the broader circular debt pile is worked down. None of these four is named in the report itself, but each carries explicit exposure to power-sector arrears through the receivables and cash-flow timing that circular debt directly affects.

What to Watch

The figures that will show whether this problem is easing or worsening further are the next quarterly or annual circular-debt updates from the Power Division, along with any government moves such as tariff adjustments, subsidy disbursements, or the periodic debt-swap deals used to reduce the stock of overdue payments. A shrinking number over successive reporting periods would ease the cash-flow strain on IPPs; a continued rise would mean the affected companies keep waiting longer to collect on power they have already supplied.