Pakistan LNG and diesel plants offer viable Energy Transition Mechanism targets

An IEEFA assessment identifies three medium-sized thermal power plants in Pakistan — Saif Power, Halmore Power Generation and Sapphire Electric Company — as financially viable candidates for early retirement under the Asian Development Bank's Energy Transition Mechanism, offering a balanced outcome for the government, plant owners and incoming investors. The plants, operating on LNG or diesel, each carry a retirement valuation of US$47 million to US$51 million under immediate phaseout scenarios.

IEEFA analysts Haneea Isaad and Grant Hauber used discounted cash flow analysis and carbon emissions assessment to identify ETM candidates across Pakistan's thermal and coal fleet. The three priority candidates — Saif Power, Halmore and Sapphire — are each 220-230 MW in capacity and approximately 12-13 years old, having reached roughly the midpoint of their 30-year PPAs. An immediate retirement would cap their valuation at US$47-51 million each, while retiring them after a few more years of operation and shaving the final 10 years off their economic lifetime would reduce valuations to US$17.5-18.6 million per plant. Avoided CO2 emissions across all three in an immediate retirement scenario total 10-18 million tonnes.

Pakistan's coal fleet — predominantly financed under intergovernmental agreements with Chinese independent power producers and carrying sovereign guarantees — is a different case. Coal represents more than 14% of total installed capacity at 7.3 GW and supplies nearly 20% of total power generated. IEEFA's analysis of the oldest four coal plants shows an immediate retirement valuation of US$1.1-1.6 billion per plant, falling to US$111-174.8 million if the PPAs are terminated 10 years before the 30-year contract end. Each plant could avoid up to 250 Mt of CO2 if retired immediately, but the political and financial complexity of premature closure under current agreements makes the LNG and diesel fleet a more practical near-term focus.

The ETM framework developed by the ADB requires willing participants across three stakeholder categories — government, plant owners and incoming investors — and must ultimately deliver benefits to Pakistani citizens in the form of reduced electricity costs, fiscal relief and environmental improvement. Pakistan expressed ETM interest at COP26 but faces acute economic instability and foreign currency constraints that complicate negotiations. IEEFA argues there is nonetheless a viable pathway: retiring the LNG and diesel plants now, beginning long-term coal phaseout planning as debt servicing completes, and channelling any ETM proceeds toward renewable energy investment to reduce Pakistan's dependence on imported fossil fuels.

Key figure — US$1.1-1.6 billion — estimated retirement valuation for each of Pakistan's oldest coal power plants under an immediate phaseout scenario