PACRA Upgrades the Entity Ratings of Multan Electric Power Company Limited

Multan Electric Power Company Limited (“MEPCO” or “the Company”) holds strategic importance within Pakistan’s power sector, serving over 8.82mln consumers—the largest customer base among distribution companies—predominantly domestic and concentrated in rural areas (around 89%). The Company benefits from sovereign ownership under the Ministry of Energy (Power Division), ensuring sustained financial and managerial support. Additionally, MEPCO enjoys access to concessional funding and the capacity to mobilize financial resources from multilateral development partners. Revenue is derived entirely from electricity distribution, with any tariff shortfall absorbed by the Government of Pakistan through the Tariff Differential Subsidy (TDS). The upgrade is underpinned by continued improvement in MEPCO’s distribution losses: though still above the regulatory benchmark, at 13.8% against an allowed 11.3% in FY25, the associated financial burden narrowed sharply to PKR 3.4bln from PKR 41.9bln in FY24. This, together with a recovery ratio sustained above 100% (101.7%) for a second consecutive year—among the strongest in the DISCO peer set—has provided meaningful relief to the broader system. Sector-wide, average T&D losses across ex-WAPDA DISCOs stood at a much higher 17.55% (allowed: 11.43%) in FY25, underscoring MEPCO’s comparatively stronger footing. Business risk is assessed as low to moderate, supported by exposure to government entities, security deposits held against connections, and the absence of alternate distributors within its service territory; nevertheless, the increasing pace of solarization may introduce emerging demand-side risks. Liquidity risk remains low, with working capital needs met largely through internal cash generation; delays in receivables from government-backed entities are partly offset by netting against government payables. As of 9MFY26, MEPCO held short-term investments of PKR 20.3bln with no market-based short-term borrowing. Equity, though still negative at PKR 25.7bln (FY25: negative PKR 76.7bln), continues to improve, aided by the GoP’s history of equity injections.
Effective execution of the investment plan, sustained financial performance, and continued narrowing of the loss gap alongside further recovery gains remain key to maintaining the ratings. Subdued demand—driven by rising tariffs and expanding rooftop solar and net-metering adoption—could weigh on the topline going forward. MEPCO remains fully state-owned; the GoP has reaffirmed its inclusion in the fourth batch of DISCOs identified for privatization, part of a wider sector reform agenda that also involves restructuring and winding down legacy loss-making entities ahead of the planned transactions. As with peer DISCOs currently progressing through similar transactions, the eventual investor profile, transaction structure, and transfer of management control could, over time, dilute the government-backed comfort that currently underpins the ratings; this, alongside evolving sector-wide dynamics and the regulatory and tariff framework, will remain a key consideration in the assessment of MEPCO’s ratings going forward.

About the Entity
The Company, a public limited entity, was incorporated on May 14, 1998, as part of the GoP’s policy to unbundle and corporatize the power sector, successor to the Multan Area Electricity Board (MAEB), previously under WAPDA. MEPCO holds a license for power distribution across 15 districts in Southern Punjab, headquartered on Khanewal Road, Multan. The Board is chaired by Mr. Amer Zia; the management team is led by CEO Eng. Jam Gul Muhammad.