IEEFA identifies three Pakistani thermal plants as viable early retirement candidates

A new IEEFA report identifies three medium-sized, middle-aged LNG and diesel power plants in Pakistan — owned by Saif Power, Halmore Power Generation and Sapphire Electric Company — as the most viable candidates for early retirement under the Asian Development Bank's Energy Transition Mechanism. Pakistan's young coal fleet is considered too costly to retire immediately, with IEEFA recommending phaseout only after debt servicing obligations are largely complete.

Using a discounted cash flow analysis and carbon emissions assessment, IEEFA found that Saif Power, Halmore and Sapphire — each with generating capacity of 220-230 MW and approximately 12-13 years of operational history — have reached roughly the midpoint of their 30-year power purchase agreements. Immediate retirement of all three plants would cap their combined valuation at US$47 million to US$51 million each, while waiting several more years to shave the last decade off their economic lifetimes would reduce their valuation to US$17.5 million to US$18.6 million per plant. Total avoided carbon emissions across all three plants in an immediate retirement scenario range from 10 to 18 million tonnes of CO2.

Pakistan's coal fleet, all plants under six years old and predominantly operated by Chinese independent power producers, represents 7.3 GW or more than 14% of total installed capacity. IEEFA's DCF analysis of immediate retirement for four selected coal plants — Engro Powergen Thar, Huaneng Shandong Ruyi Sahiwal, Port Qasim Electric Power and China Power Hub Generation — yields valuations of US$1.1 billion to US$1.6 billion. Retirement after debt servicing reduces this to US$398 million to US$628 million, and termination of PPAs 10 years early drops it further to US$111 million to US$174.8 million, alongside avoided emissions of up to 250 Mt of CO2 per plant if retired immediately.

Pakistan expressed interest in the ADB's ETM at COP26 in 2021, but the country's economic crisis complicates negotiations. The mechanism requires agreement among plant owners, the government and ETM investors — all with different financial incentives — and operates under intergovernmental agreements and sovereign guarantees that make premature closures politically sensitive. IEEFA recommends prioritising the three LNG and diesel plants for near-term ETM transactions given their more manageable valuations, while beginning early-stage negotiations on coal plant phaseout aligned with debt service completion timelines to ensure the ultimate beneficiaries — Pakistan's citizens — receive fiscal and health benefits from avoided emissions and reduced capacity payments.

Key figure — US$47-51 million — estimated valuation for each of the three priority ETM candidate plants under immediate retirement