PACRA Maintains the Entity Ratings of Faisalabad Electric Supply Company Limited

Faisalabad Electric Supply Company Limited (FESCO) is a state-owned power distribution company operating under the Ministry of Energy – Power Division. As the key electricity distributor across the industrial hub of Faisalabad and seven surrounding districts of Central Punjab, the Company serves approximately 5.8 million connections, with a consumer mix predominantly domestic (89%), followed by commercial (8%), agricultural (1%), industrial (1%)and other general services (1%). Pakistan's power distribution sector continues to operate under considerable financial strain, with ex-WAPDA DISCOs collectively reporting elevated T&D losses and below-target recovery rates, which have contributed to circular debt and placed a recurring burden on the broader power sector. This has underscored the need for financial restructuring across the sector, for which the government has initiated a privatization program targeting select DISCOs as a key reform measure. FESCO is among the three DISCOs included in the first tranche of this agenda, alongside GEPCO and IESCO. The process has advanced, with the Cabinet Committee on Privatization approving the sale of up to 100% equity along with management control; EOIs were invited in May 2026, with FESCO’s submission deadline set for 7 July 2026. Against the national ex-WAPDA DISCO average T&D losses of 17.55%, FESCO's losses stood at 8.89% in FY25, marginally above its NEPRA-allowed limit of 8.38% — the smallest excess among all DISCOs. Similarly, against a sector-wide average recovery rate of 96.3%, FESCO recorded 100.4%, placing it among five DISCOs that have met or exceeded the regulatory target. FESCO's standing as one of the better-performing DISCOs is partly supported by the nature of its service territory — a relatively urbanized and industrialized belt of Central Punjab with a stronger consumer payment culture — in contrast to DISCOs like TESCO and HESCO, which operate across more dispersed, rural, or security-challenged geographies that structurally weigh on recovery and loss metrics. This operating-environment advantage remains a relevant consideration alongside FESCO’s own management practices in assessing its relative performance. Going forward, sector demand dynamics continue to shift on two fronts: industrial consumers migrating to the grid amid the new captive power levy, which could support consumption, set against rising distributed solar and off-grid adoption, which could weigh on it. Their combined effect on DISCOs generally, and on FESCO's operating profile specifically, remains a relevant consideration ahead. The Company’s leverage remains low, with no short-term borrowings and minimal long-term debt comprising only a concessional, government-facilitated ADB loan of Rs 5.5bln.
The assigned ratings draw comfort from FESCO's conservative capital structure, with low leverage and debt largely comprising concessional, government-facilitated financing, alongside its ability to sustain performance through T&D losses within NEPRA's limits and recovery ratio at current levels. This comfort is further supported by the Company's ownership by the Government of Pakistan and the associated governance and financial framework. However, this framework is expected to shift as privatization advances; the eventual investor profile, transaction structure, and transfer of ownership and management control could dilute the current government-backed comfort in the ratings. This, alongside evolving sector-wide dynamics and the regulatory and tariff framework, will remain a principal consideration in the assessment of the ratings going forward.

About the Entity
FESCO, incorporated as a public limited company in 1998, took over the assets and operations of the former Faisalabad Area Electricity Board from WAPDA. FESCO is responsible for electricity distribution and supply across a major region of Central Punjab, operating a vast network of grid stations and serving over 26 million people. Wholly owned by the Government of Pakistan, it is guided by a Board of Directors chaired by Mr. Omer Farooq Khan, with Mr. Muhammad Aamir as Chief Executive Officer.