PRIVATE POWER & INFRASTRUCTURE BOARD

 

GOVERNMENT OF PAKISTAN

MINISTRY OF WATER & POWER

   
  FAQs

 

1.

What does IPP stand for ?
IPP is an abbreviation of Independent Power Producer

2.

How many  IPPs facilitated by PPIB are functional  in Pakistan?
At present there are 29 private power projects with a installed capacity of about 7423 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.

3.

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.

4.

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. 

5 Who are the main lenders?

Foreign Lenders Local Lenders

IFC        

National Bank of Pakistan
World Bank Habib Bank Limited
ADB United Bank Limited
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)  
SWEDFUND (Sweden)  
OPIC (US)  
   
6 Who are the Investors(Sponsors) in Private Power Projects?

Foreign Investors (Sponsors) Local Investors (Sponsors)

International Power (UK)

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  
Oman Oil  
DEG Germany  
GE Capital  
   
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.
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.

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.

 

2001

2011

%age Change

RFO Price (Rs./M.ton)

11,569

69,813

603.45

Gas Price (Rs./MMBtu)

182

394

216.48

Devaluation of Pak Rupee vs. US Dollar

64

86

34.38

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.

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

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.

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.

14

Is there any Hydropower IPP in Pakistan?

84 MW New Bong is Ist Hydro-IPP in Pakistan.

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.

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.
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.

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.

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. Pakistans 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.

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.

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.
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.

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.

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.

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.

 

 
 
 Home  Links Tenders   Careers