Power Sector Circular Debt Rises Rs364 Billion in FY26: HUBC, PSO Stocks in Focus

What the Rs364 Billion Circular Debt Jump Changed

Pakistan's energy circular debt, the pile of unpaid bills that stacks up when power and gas distributors cannot fully pay the companies that generate electricity and supply fuel, grew by Rs364 billion during fiscal year 2025-26, according to a report picked up by Minute Mirror. Circular debt is not a single company's problem. It is a chain: consumers and distribution companies fall behind on bills, so the distributors cannot pay generation companies in full, generation companies cannot pay their fuel suppliers, and fuel suppliers cannot pay the exploration firms that produce the gas and oil feeding the system. Every step in that chain delays cash that would otherwise reach a listed company's balance sheet.

The report gives the size of the increase for the year but not a breakdown of which distributor, region or fuel type drove it. That matters for how directly any single stock is hit, since the companies below sit at different points along the same payment chain.

Why Hub Power and Pakistan State Oil Stocks Are in Focus

Hub Power runs on a capacity payment model, meaning it is paid partly for having plants available rather than only for power sold, but circular debt still delays when that cash actually lands, stretching working capital and keeping receivables elevated for longer. Pakistan State Oil sits closer to the centre of the problem: it fronts the cost of imported fuel for the power sector and waits to be repaid, so a bigger circular debt pile squeezes its own cash position directly and can push it to borrow more just to keep importing fuel.

Which Stocks, and Why

Independent power producers Kot Addu Power and Nishat Power earn contracted, capacity-based returns, but both carry circular debt receivables on their books, so a larger unpaid balance is a drag on how quickly they collect cash even though their contracted tariff itself is not in question.

Gas utilities Sui Northern Gas Pipelines and Sui Southern Gas Company earn regulated returns set by OGRA, but both carry circular debt receivables from the power sector and other gas consumers, which can crimp cash flow even when their allowed return on assets stays intact.

Further up the chain, exploration and production companies OGDC and PPL supply the gas that ultimately feeds power plants, and both carry sizeable circular debt receivables on their balance sheets. A growing pile means slower cash collection for them too, even though reported profit is largely unaffected in the near term since revenue is typically booked whether or not the cash has actually landed.

For all of these companies, the effect shows up in cash flow and balance sheet risk rather than in the underlying business itself. Contracted tariffs, production volumes and OGRA-set margins do not change because of this report.

What to Watch

Readers should track the government's next circular debt reduction plan, since Pakistan has previously leaned on borrowing facilities, tariff adjustments and asset sales to bring the stock down temporarily. Quarterly results from PSO, Hub Power and the E&P majors typically disclose receivable ageing and financing costs tied to overdue payments, which show up more concretely than a single annual total. Any IMF programme review that ties disbursements to energy sector reform is also worth watching, since circular debt containment is a standard condition in those talks.