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1.
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What does IPP stand for ?
IPP is an abbreviation of Independent Power Producer
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2.
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How many
IPPs
facilitated by PPIB are functional
in Pakistan?
At present there are 28 private power projects with
a installed capacity of about 7019 MW which are in
operation. In addition Kot Addu Power Company
(1650MW) and KESC power plants (1946 MW) are also
operating in the private sector.
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3.
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Why has private sector been inducted in power
generation?
Power shortage had been one of the chronic problems
hampering Pakistan's socio-economic growth since
late 1980s, the problem had assumed such acute
dimensions that power supply fell short of demand by
almost 2000 MW during peak load hours. On a routine
basis, this resulted in forced interruptions in the
supply of electricity to consumers during peak hours
resulting in load shedding. The unreliable power
supply shattered the industrial progress. There was
a gap between demand and supply due to the rapid
increase in electricity demand (estimated to be
growing at a rate of 7-8 % per annum at that time).
This situation called for immediate intervention by
the GOP through adoption of policy measures aimed at
massive resource mobilization for investment in the
power/energy sector. The enormous quantum of
required investment compared with the constrained
funding potential of the national exchequer, was not
conducive to allocation of scarce GOP funds for
power/energy. Therefore, the GOP took a bold
initiative in late 80s to induct private sector
investment in the power sector.
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4.
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Why was PPIB created as a dedicated institution
to handle Private Power Projects?
Developing power generation capacity is very capital
intensive. For example the capital requirements for
the current deficit of 5000 - 7000 MW estimated for
summer of 2011 are wobbling sums of US$ 6 to 9
billion. Such amounts cannot be carved out from the
annual budget of federal government. As such in late
eighties the Government of Pakistan made in
principle decision to seek private sector investment
in power generation. Attracting investment of that
big magnitude require a team of highly qualified
professionals who are trained in project, financial
and contract management / analysis beside being
courteous and imbued in corporate culture. Long and
tedious experimentations by various governmental
agencies on part time basis with HUBCO (the first
private sector power generation project) and other
prospective Independent power Producers (IPPs) in
late 1980's convinced the government to create a
dedicated organization having roots in government
but having a corporate look that could provide a
suitable interface to private sector entrepreneurs,
their consultants, lawyers, and lenders feel easy to
approach, Private Power and Infrastructure
Board(PPIB) was created as a dedicated one window
facilitator for attracting private investments in
power sector.
The
resultant success of PPIB was so impressive that
PPIB's model was followed by many other countries.
Given the current shortfall and magnitude of
investment required, the justification of PPIB as
dedicated institute for providing one window
facilitation and attract private investment in power
sector has magnified manifold.
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5 |
Who are the main lenders?
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Foreign Lenders |
Local Lenders |
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IFC
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National Bank of Pakistan |
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World Bank |
Habib Bank Limited |
| ADB |
United Bank Limited |
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IDB |
Muslim Commercial Bank |
| US Exim Bank |
Allied Bank Limited |
| AIDEC |
Askari Bank Limited |
| CDC (UK) |
Faysal Bank Limited |
| EDC (UK) |
Meezan Bank Limited |
| SACHE (Italy) |
Bank Al Habib |
| ANZ Banking Group
(Australia) |
Habib Metropolitan Bank Limited |
| ABN Amro Bank (Now merged with Faysal Bank) |
The Bank of Punjab |
| Jexim (Japan) |
Soneri Bank Limited |
| Bank of Tokyo Mitsubishi |
NIB Bank Limited |
| Toronto-Dominion Bank |
Pak Oman Investment Company |
| DEG (Germany) |
Pak China Investment Company |
| FMO (Netherlands) |
Saudi Pak Industrial and Agricultural
Investment Company |
| PROPARCO (France) |
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| SWEDFUND (Sweden) |
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| OPIC (US) |
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6 |
Who
are the Investors(Sponsors) in Private Power Projects?
| Foreign Investors (Sponsors) |
Local
Investors (Sponsors) |
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International Power (UK)
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Nishat Group |
| Congen Technology |
Sapphire Textile Limited |
| El Paso (USA) |
Attock Refinery Limited |
| Tenaska (USA) |
Engro Chemical |
| Mitsui (Japan) |
Shirazi Investment |
| Xenel (KSA) |
Fauji Foundation |
| TNB - (Malaysia) |
Saif Group |
| AES Corporation |
Liberty Mills |
| ADB |
Descon Group |
| IFC |
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| Oman Oil |
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| DEG Germany |
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| GE Capital |
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7 |
What is the minimum equity requirement to finance
IPPs in Pakistan?
The minimum equity
requirement for an IPP in Pakistan is 20% of the
total Project Cost. |
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8 |
Why IPPs were allowed to do business in Pakistan
?
If projects are implemented
through the public sector utilities, they absorb a
significant portion of national budget allocation.
The allocation for new power projects surpasses the
cumulative allocation for health, housing, education
and agriculture sectors. Therefore, in order to save
governmental allocations for these vital sectors,
private sector investment has been sought in
Pakistan.
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9 |
Induction of IPPs has resulted in increase in
consumer tariff. Is it true?
The
Bulk Power Tariff (BPT) offered by
Pakistan to the IPPs inducted under
the 1994 Power Policy was comparable to the IPP
tariffs in other Asian countries. The increase in
tariff with time is mainly due to increase in the
prices of furnace oil and gas, and devaluation of
the Pak Rupee. The table below depicts a 603% rise
in furnace oil prices, a 216% increase in gas
prices, and a 34% devaluation of the Pak Rupee
against the US Dollar during the last ten years.
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2001
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2011
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%age Change
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RFO Price (Rs./M.ton)
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11,569
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69,813
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603.45
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Gas Price (Rs./MMBtu)
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182
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394
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216.48
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Devaluation of Pak Rupee
vs. US Dollar
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64
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86
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34.38
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10 |
Who determines the tariff for IPPs?
In order to promote
fair competition in the electricity industry and to
protect the interests of consumers, producers and
sellers of electric power, the GOP has enacted the
Regulation of Generation, Transmission and
Distribution of Electric Power Act, 1997. Under this
Act, the National Electric Power Regulatory
Authority (NEPRA) has been created to introduce
transparent and judicious economic regulation, based
on sound commercial principles, to the power sector
of
Pakistan. One
primary responsibility of the regulator is
determination of tariff for the various generation,
transmission, and distribution companies – including
the IPPs. NEPRA follows a standard and transparent
procedure for tariff determination, which includes
public hearing and views from all stakeholders.
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11 |
What is the estimated
hydropower potential in Pakistan, and How much of
the total potential has been developed so far ?
Estimated power potential in Pakistan is about
60,000 MW and Projects with installed capacity of
6804 MW have been developed so far
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12 |
Where can some one find
information on status of hydropower projects in
Pakistan ?
Information on the status of
hydropower projects can be found in the report "Hydro Power Resources of Pakistan" published by PPIB.
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13 |
Which are the major
hydropower plants in Pakistan?
Tarbela (3478 MW), Ghazi-Barotha (1450 MW) and
Mangla (1000 MW) are the major hydropower plants in
operation in Pakistan.
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14 |
Is
there any Hydropower IPP in Pakistan?
84 MW New Bong
is Ist Hydro-IPP in Pakistan.
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15 |
What is the model of
hydropower project implementation in private sector?
Hydropower Projects in private sector are being
implemented on Build- Own-Operate-Transfer (BOOT)
basis and the project based on this model
shall be
transferred to the Government at the end of the
concession period.
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16 |
What is the concession
period for hydropower projects?
The concession period for BOOT based hydropower
projects is upto 50 years. However, 25-30 years is
normally acceptable by the stake holders. |
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17 |
What is the average cost
of building a hydropower project?
According to the data available on the hydropower
projects recently under implementation, the average
capital cost for construction is being worked out as
1.5 million to 2 million US $/ MW. This cost is for
medium size run of river type hydropower projects,
however, the costs of building a hydropower project
can vary considerably depending upon nature and
location of the project, availability of
transmission line and potential environmental
mitigation needs.
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18 |
What is the construction
time required for development of hydropower project?
Due to the site specific nature and being on
remote locations, construction time required for
development of hydropower project is a bit longer as
compared with the thermal power projects. For a
medium size run of river hydropower project the
development and construction time could be around 5
to 6 years.
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19 |
What is the coal resources potential in the country?
Numerous studies have been conducted all of which have
concluded that all coal reserves of
Pakistan are suitable for power
generation.
Pakistan’s total
coal reserves are 186,007 million tons. The biggest
coal reserve of Thar which lies in Sindh has an
estimated potential of 175,506 million tons and
preliminary studies suggest that Thar is capable of
generating 100,000 MW for two centuries.
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20 |
What efforts are being made by
PPIB to develop
local
coal based projects ?
In spite of fact that constitutionally coal is a
provincial subject, PPIB has endeavored to promote
private sector investment in coal based power
generation. PPIB has processed numerous proposals of
coal based projects which either could not
materialize or progress remained
slow due to
issues like cancellation of lease/exploration
licenses by the concerned provincial agencies, and
hurdles like absence of proper coal pricing
mechanism / agency, draft agreements with provincial
agencies enumerating incentives / concessions for
coal mining projects, undeveloped supporting
infrastructure like road network, cooling water,
transmission lines, etc.
Nonetheless, PPIB has already approved in
principle issuance of LOI for a 1200 MW coal based
power project at Thar and a 405 MW project at Sonda
Jherruk.
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21 |
What efforts
are being made by PPIB to develop
imported coal based projects ?
Presently PPIB is processing following two imported
coal based projects:
1.
1200MW imported coal based power project near
Karachi, awarded to AES.
2. 300MW
imported coal based power project near Jamshoro
through ICB. |
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22 |
What are the difficulties in mining coal from THAR ?
THAR coal has many technical
issues like it has thick overburden (150
m), high stripping ratio (6.2 cu. m /ton), low
heating value (calorific value 12.69 MJ/kg), high
moisture content (50%), unavailability of cooling
water, unavailability of basic infrastructure,
brackish underground water, extremely hot climate,
high ambient temperature (51 degrees C), serious
clinkering property of coal and high mining cost.
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23 |
What efforts are being made to develop power
projects based on Thar Coal?
The Federal Government has announced a set of
incentives for coal mining and coal based power
projects. Whereas the Government of Sindh (GoS) has
created a high power decision making agency i.e.
Thar Coal & Energy Board (TCEB) which has high level
representation from both the federal and provincial
governments. GoS and TCEB have allocated Rs. 27 billion for the provision of cooling
water, Rs. 4.963 billion for the improvement of road
network, Rs. 0.972 billion for construction of
airport, while 50 acres land has been allocated for
effluent disposal. Accordingly for the development
of transmission line and broad-gauge rail link
feasibility studies has been completed and their
PC-I has been approved. Once these facilities will be completed then Thar coal projects
will move smoothly.
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24 |
Will
there be any role of PPIB in coal based power
generation after creation of TCEB?
Yes, in support of TCEB and provincial governments PPIB will continue to
issue LOIs and LOSs for coal based power projects
above 50 MW because TCEB will be the focal and
decision making body for coal affairs of Thar coal field located in Sindh province.
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25 |
Instead of conventional mining why underground coal
gasification projects are not being initiated?
Underground Coal
Gasification (UCG) technology is in development
stage and a pilot project at Thar block-V based on
UCG is being implemented. After ascertaining
commercial viability of the pilot project, large
scale projects would be considered.
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FAQs
