Strategic Importance
Adequate and reliable power supply is a key to achieving sustainable economic growth. Presently, out of a population exceeding 176 million, only around 70% have access to electricity and the government is committed to provide electricity access to the entire population in the minimum possible time.

Strong and Increasing Demand for Electricity

Demand has outstripped supply of electricity and the country is presently facing power shortages of approximately 5,000 MW during peak demand time. The present electricity demand-supply gap, coupled with consistent growth in demand, clearly indicates the fundamental need and market for enhancing the country's current power generation capability.

Leading International/Local Companies Already Operating in Pakistan

Presently, 31 Independent Power Producers (IPPs) are operating in the country. Thus, leading international / local companies are already present in the market, e.g. Siemens, General Electric, AES, International Power, El Paso, Tenaska, Nishat Group, Engro, Atlas, Sapphire, Fauji Foundation etc.

One-Window Facilitator and Investor-Friendly Policy

PPIB, with a successful track-record of attracting foreign and local investments of more than US$ 10 Billion, acts as a one-window facilitator for the processing of private power generation projects in the country. In this regard, GOP has recently announced a new Power Generation Policy 2015 offering enhanced incentives and simplified processing to bridge the demand supply gap in the minimum time through generation of affordable electricity for socio-economic uplift of the country.

IPPs under Construction

A number of IPPs are under construction after getting approval of tariff from NEPRA through a well-defined process of tariff determination that includes public hearing. These IPPs are sponsored by consortia of local and foreign investors.

GOP's Policy Commitment to Increase Private Sector Participation

Presently, approximately 50% of the generation capacity of the country is in the Private sector. The successive governments in the country, since the early 90s, have reiterated the commitment to increase private sector participation. Consequently, major divestments of public sector entities have been made in various sectors.

Transparent Regulatory Environment

The National Electric Power Regulatory Authority (NEPRA) has been setup for the regulation of power sector in Pakistan. The Authority endeavors to balance the interests of consumers and power sector companies. NEPRA has made considerable progress towards the development of the regulatory regime and future market design for the power sector. All generation, transmission, and distribution companies are now licensees of NEPRA, and abide by the rules and regulations laid down by the regulator for reliable and efficient operation of the power sector.

Availability of GOP Guarantee and Protection 

Under the Power Generation Policy, 2015, PPIB issues the GOP Guarantee backing up the payment obligation of the Power Purchaser and/or Provincial/AJK/GB governments where tariff is determined by NEPRA and Power Purchaser is a federal entity. In case of provincial power purchaser where tariff is determined by the NEPRA the GOP guarantee is issued where it is fully backed by the respective provincial government as a change against its share in the divisible pool as per NFC award subject to a cumulative limit of 20% of the share of the respective Province in a given year or as may be decided between the Federal and the respective provincial government.

Multi-Year & Long-Term Tariff 

Typically, a long-term tariff of twenty-five (25) to thirty (30) years, determined by the regulator, is contracted with the Power Purchaser. The IPPs, thus, are not subjected to market risk for their output. The projects are expected to earn an attractive, competitive, and stable return on investment.

Standardized Security Package

Standardized and bankable project agreements i.e. the Implementation Agreement (IA), the Power Purchase Agreement (PPA), the Water Use Agreement (WUA), are available upfront.

Pass-through of Fuel Cost

Variation in the price of fuel is to be passed on to the Power Purchaser.

Risk Coverage for Exchange Rate Variation

To cover exchange rate variation risk, various components of the Tariff are indexed for any variation in the Pak Rupee and US$ exchange rates.

Protection against Change in Duties & Taxes 

Any additional taxes and duties, over and above the Tariff determined by NEPRA, are liable to be passed on to the Power Purchaser. 

Protection against Specified Force Majeure Events

GOP provides protection against events (triggered by either a change in law or a political force majeure) that are beyond the reasonable control of the Sponsors and adversely affect the performance of their obligations.

Tax Exemptions

Exemption from income tax,  turnover rate tax and withholding tax on import, is available to power generation projects.

Debt Financing & EPC Contracts in Four Currencies

Debt Financing and EPC contracts based on US Dollar, Euro, Pound Sterling and Japanese Yen have been allowed under the Policy. At Commercial Operation Date (COD), Capital Cost will be fixed in US Dollars by NEPRA based on actual currencies of the EPC contract accepted at the time of tariff determination, sources of financing, payments, and actual exchange rates against Pak Rupee for the aforementioned four currencies.

Abundant Hydropower / Coal Potential

There is an identified hydropower potential of over 60,000 MW and confirmed availability of abundant indigenous coal resources (around 186 billion tons) in the country.

Power Purchaser to bear Hydrological Risk

For hydropower projects, the investors are completely protected from any variation in water flows over the years, as Hydrological Risk is to be borne entirely by the Power Purchaser. The hydropower comes under economic dispatch criteria and hence gets priority of dispatch.

Availability of Skilled Manpower

Good quality and cost-effective technical manpower is available in Pakistan, as IPPs have been operating in the country for more than a decade now.

Set of Incentives, Concessions and Protections for Development of Indigenous Resources

  • The Coalfield be declared as Special Economic Zone, and the projects of development of Thar (also including coal mining and power generation) be declared as 'Projects of National Security'

  • 20% ($based) IRR to firms which achieve Financial Close before 31st December 2015 for Mining &Power Projects based on indigenous coal and additional half a percentage IRR i.e. 20.5% IRR for firms which achieve Financial Close by or before 31st December 2014.

  • Zero percent customs duties on import of coal mining equipment and machinery including vehicles for site use.

  • Exemption on withholding tax to shareholders on dividend for initial 30 years.

  • Exemption on withholding tax on procurement of goods and services during project construction and operations.

  • Exemption for 30 years on other levies including special excise duty, federal excise duty, WPPF and WWF.

  • In addition to the aforesaid incentives, Coal Based Power Projects and Coal Mining Projects in Sindh shall have the same incentives, concessions, protections and security package as that available to IPPs developed pursuant to Power Generation Policy 2002 (as amended from time to time).

  • TCEB to also function as the Coal Pricing Agency.


The Economic Coordination Committee (ECC) of the Cabinet has granted waiver for coal based power projects and co-generation projects utilizing coal (along with bagasse) by sugar mills from the requirement of having firm Engineering Procurement Construction (EPC) contract for tariff determination as in relaxation of earlier ECC decision dated 23rd May, 2007. 


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