The Auditor General of Pakistan (AGP) has identified significant financial and operational weaknesses at the Neelum-Jhelum Hydropower Project (NJHP), reporting total losses exceeding Rs128 billion during FY2024-25 due to prolonged shutdowns, structural failures, and mounting financial pressures.

According to the audit report, the project recorded a net loss of Rs29.41 billion, while an additional Rs99.18 billion was lost because of business interruptions following the collapse of the tailrace tunnel (TRT) and the headrace tunnel (HRT), which forced the 969MW power plant to remain out of operation since May 2024.

The AGP noted that the project's financial position has continued to deteriorate, with rising debt obligations, weak liquidity, and an inability to meet its operational and commercial objectives. The report highlighted that investigations into the successive tunnel collapses have yet to be finalized, delaying accountability and corrective measures.

The audit also found that the project failed to achieve its planned electricity generation target of 5,150 GWh in any year since commissioning. Repeated structural failures and prolonged shutdowns significantly reduced power generation, resulting in substantial revenue losses.

Another major concern highlighted by the AGP was the delay in securing a reference tariff from the National Electric Power Regulatory Authority (Nepra). Due to the absence of third-party validation of project costs, the project operated under a lower provisional tariff, leading to an estimated Rs77.35 billion revenue shortfall.

The report further pointed to weaknesses in financial management, including inadequate insurance coverage for critical infrastructure, failure to renew key insurance policies, and the absence of compensation for losses arising from the tunnel collapse.

Liquidity indicators also remained under severe pressure. As of June 30, 2025, current liabilities exceeded current assets by Rs307.89 billion, reflecting growing debt repayment challenges and a weakening financial position.

The AGP reported that the project has fallen significantly behind its planned investment recovery targets. Against an approved project cost of Rs418.89 billion, only Rs180.17 billion had been recovered by FY2024-25. Additionally, around 69% of receivables remained overdue for more than 120 days, while assets valued at approximately Rs267 billion remained uninsured during the audit period.

The report concludes that persistent operational disruptions, delayed regulatory approvals, inadequate risk management, and weak financial governance have significantly undermined the long-term sustainability of one of Pakistan's largest hydropower projects, highlighting the need for urgent corrective action to restore its operational and financial viability.