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The total installed capacity of power generation presently is l2, 851 MW which is insufficient to meet the demand on a year around basis. The conservative projections for annual increase in the demand are nearly 8% per annun1 for the next 25 years. The additional power generation capacity needed upto year 2018 will be 54,000 MW. The Government of Pakistan to induce private sector investment in this sector had announced a policy package for thermal power generation in March 1994. |
A policy package for power distribution in private sector was announced in March 1995.
The Government has constituted a Private Power and Infrastructure Board (PPIB) to facilitate the development of private power projects by one window operation. The Board is responsible to coordinate with the all agencies and Ministries concerned and taking decisions, monitoring the performance of tile private sector projects in accordance with the agreements, and safeguarding the interest of the consumers.
Since the announcement of the new energy policy in March 1994, there has been healthy response from both the local and overseas investors. The letter of support has been issued to 30 projects with an aggregate capacity of 7,185 MW power generation. In addition, numerous Memorandum of Understanding have been signed between GOP and foreign companies.
The policy and incentives package for the private thermal power projects provides for the following.
Location
There is no restriction as to the site, technology and type of fuel for the project. The Government has specified preferred locations for thermal power projects.
Application and processing of proposals
Procedure for application anti processing of application has been explicitly provided in the policy. The proposals could either be solicited or unsolicited. Applications would only be accepted for processing, if accompanied with the prescribed fee.
Assessment is based on the technical and financial viability and Letter of Interest (LOI) is issued to viable projects by the PPIB. Within two weeks and six weeks of receipt of LOI for solicited and unsolicited proposals respectively, the applicant is required to furnish a performance Guarantee (PG) i.e. an irrevocable bank guarantee. Letter of Support (LOS) is issued alter the receipt and acceptance of PG by the sponsors.
The Implementation Agreement (IA) and Power Purchase Agreement (PPA) are signed within a period of four weeks of the issuance of the LOS.
The sponsors are required to achieve financial close within one year of the issuance of the LOS.
Tariff for bulk purchase of power
The policy provides for purchase of power by the Water and Power Development Authority Karachi Electric Supply Corporation (WAPDA/KESC) under the PPA covering concession period.
First ten years average Bulk Power Tariff (BPT ) of 6.5 US Cents per Kilo Watt Hour (kWh) has been prescribed under the policy. Additionally, a ‘Levelised tariff of US Cents 5.9 kWh over the life of the project has been prescribed as a final parameter for acceptance of the tariff. A mechanism has been provided for indexation / adjustment of certain components of the tariff based on Rupee / Dollar exchange rate, fuel price variations and inflation.
Premium of US Cents 0.25/kWh on energy sold during first ten years is prescribed projects of over 100 MW, Commencing commercial operations by the end of 1997.
Payment of BPT
The tariff is an indicative tariff based on annual plant factor of 60% and comprise of two components, i.e. capacity Price (CP) and Energy Price (EP) The CP will be assured by the terms of Concession Agreement and paid on monthly basis, irrespective of energy, actually sold during the month. There will be no guarantee for purchase of any specified quantity of energy. The EP component will be paid on the basis of actual energy purchased by the WAPDA KESC.
Interconnection with the WAPDA / KESC transmission system
The power would be purchased at the outgoing terminal of the High voltage Extra high voltage (HV/EHV) substation of the power plant. The cost of interconnecting facilities up to out going terminals of the private power project will be borne by the private power sellers.
The investors are free to propose hydel power plants on tributaries and system at any location and opt for any type of equipment. Hydel power projects shall be based on the run of river, as there is a restriction on construction of dams under the "Indus River Accord" between the provinces. Hydel power projects on the main river Indus are not open to the private sector because of water regulation and flood protection. However, hydel power plants with seasonal storage will be allowed only on streams and tributaries, the plants having capacities over 300mW which do not disturb the downstream user's water rights would be considered on case-to-case basis, irrespective of their location.
Location / feasibility studies
The feasibility studies for a number of sites and location have been developed by the federal / provincial agencies, which may be obtained by the private entrepreneurs as public document. The private investor may verify any or all of the studies and may carry out his own project appraisal.
Application and processing of proposals
Procedure for application and processing has been prescribed in the policy. Application accompanied with the prescribed fee, would only be accepted for processing .
The Letter of Interest (LOI) and Letter of Support (LOS) relating to hydel power projects will be dealt with by the relevant provincial governments.
Tariff for bulk purchase of power
The power produced by the private sector shall be purchased by the WAPDA under a long term contract covering the concession period. The BPT rates offered by the GOP in this case are based on the level of production capacity of the projects. Similar to the thermal power policy, Levelised Tariffs for 25 years of the projects are also offered as a final parameter for acceptance of tariff.
'The BPT consists of four components, i.e. water charges. variable O&M component, the escalable component and non-escalable component. A mechanism has been provided for indexation/adjustment of certain components of the tariff based on Rupee Dollar exchange rate.
Price for use of water
The BPT' includes US Cents 0.33/ kWh as price for use of water by the private power company. This price will be payable to the concerned province in equivalent Rupees, throughout the term of the PPA.
Payment of BPT
The tariff has been calculated on an annual plant factor of 50% the payment will be made on the basis of actual energy sold to WAPDA during the month. In case of non-dispatch by WAPDA. The payment will be made on the basis of ninety-five percent of the energy that could have been generated by the hydropower plant.
Interconnection of the project to WAPDA transmission system
WAPDA will purchase bulk power for interconnection to National Grid at a technically and economically acceptable point. Any cost sharing of transmission lines shall be examined in consultation with WAPD before issuance of LOI.
Location and composition
Power Transmission Packages identified by the Government of Pakistan are being offered to the private sector for bidding. The exact route / corridor for the Package and location of Grid Station would be determined by the GOP or its designated agency. Transmission line projects are being offered on Build. Own and Maintain (BOM) basis. The projects comprise of EHV (above 220 kV) overhead Transmission Lines (OHL), Grid Stations (GS) and associated equipment. The minimum design and functional performance requirement will be determined by WAPDA and or KESC.
Qualification criteria
Private sector promoters with at least three years successful experience as owners and operators of transmission system (witl1 OHL not less than 3000 km in length. and GS operated at 380 kwh) are eligible for bidding.
Procedure for bid proposal
Private sector promoters are required to register with the PPIB. The Board will provide requisite information and forms to the registered promoters for submission of the bid proposal. Proposals should he accompanied with prescribed fee.
PPIB will issue a Letter of Interest (LOI) to the promoters of the proposal found technically and financially viable. Promoters are required to furnish a Performance Guarantee (PG) valid for eight months and encashable without recourse to the promoters. On receipt of PG. the PPIB will issue Letter of Support (LOS), immediately. IA and Transmission Service Agreement (TSA) will be signed within six weeks of the issuance of LOS.
Transmission service charges
The power shall be transmitted over the transmission facilities under a long term contract covering the life of tile facilities. The sponsors will be insulated against uncertainty of daily dispatches and will be paid service charge covering capital and maintenance cost, including return on equity. The tariff on per kilometer per month basis, has been calculated for the defined regions. Service charges for associated substations, bays/ equipment have been calculated on per unit per month basis. Service charges have been calculated in US$ and will be paid on that basis.
The GOP has announced very relaxed terms and conditions for finat1citig arrangement of the power projects to facilitate private sector interest in power generation troth for thermal and hydel and power transmission. The principal concessions available are as follows:
The fiscal incentives available for companies engaged in generation or transmission of power are as follows:
