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Power generation - private sector welcome.

Power Generation - Private Sector Welcome

Co-generation facilities with some of the industries such as sugar, textile and others, who have surplus power, are being encouraged and their surplus power will be purchased by WAPDA with reasonable incentive to the private owner. Rural industries which will have surplus power after meeting their own requirements have a standing offer for the purchase of such surplus power. Even a Group of industrialists can install power generating sets for their common consumption.

Development of energy occupies a very high place amongst the priorities set for Pakistan's economic progress, industrial and agricultural boost, and social well-being. Fortunately, nature has endowed this land with rich hydel power potential in the north, compensating for limited subsoil fuels, which can take care of increasing demand for electricity at very low cost if fully exploited. Wapda's power generation system, therefore, has planned to be hydel, based. But in view of the fast rising demand for electricity in the country and long gestation period for building major hydel power projects it is now being increasingly and urgently felt that more attention has to be paid to thermal generation which should be developed as a short term remedy to meet power shortage.

WAPDA prepares its long term generation expansion plans on least cost investment basis. The programmes however could not be implemented fully because of overall financial constraints prevailing in the country. This has resulted in a situation of imbalance between the supply of power and its demand in WAPDA's power system causing loadshedding particularly in the months when the capability of hydro-electric power stations goes down due to seasonal variation in river inflows and depletion of WAPDA's reservoirs. Under the circumstances Private Secto,r a vital resource to overcome the situation, has been invited to participate in the field of electric power generation with the purpose of augmenting Government's financial resources.

A number of projects have been identified out of planned power generation projects and offered to the private sector in consultation with the Government of Pakistan. In addition to these proposals which are solicited by Government the private investors are also welcome to present unsolicited proposals of their own which are evaluated by WAPDA and the Government of Pakistan.

Incentives

In order to stimulate the interest of sponsors (local or foreign) following steps have been taken: [right arrow] WAPDA provides guidance and

necessary information to the potential

investors in order to promote and

encourage the preparation of these

projects. A standard Power Purchase

Agreement form has been prepared

for the guidance of the private parties.

A brochure describing the policy and

incentive framework has also been

published. This brochure sets out the

guidelines for the preparation,

evaluation and investment projects. [right arrow] The sponsors are required to provide

equity investment to cover at least 25

per cent of the cost of the project. The

foreign donors like World Bank, USAID,

Overseas Development Agency of the

UK (ODA) etc. have provided about

$500 million in a co-financier fund called

Private Sector Energy Development

Fund (PSEDF) for providing loans to

the private parties. This fund is

administered by National Development

Finance Corporation (NDFC) in which

World Bank has agreed to take the role

of lead donor. A loan amounting 30 per

cent of the cost of the project is allowed

out of this fund to be given to the

private investors. [right arrow] The major concern of foreign sponsors

is the risks and rewards involved in

their investment in another country,

while the concern of the Government

of Pakistan and WAPDA are

interested in the timely completion of the

project as well as its successful

operation at a reasonable cost for

competitive rate for sale of power to WAPDA.

At the same time the lenders and

investors would look for reliable debt

servicing and assured return on their

capital. A policy has, therefore, been

worked out to evolve a security

package which should satisfy and the

parties concerned. For this purpose

Government of Pakistan, WAPDA,

investors and lenders would need to enter

into a set of agreements which would

define their mutual obligations. In short

a reasonable return on equity amount

has been ensured. Foreign portion of

the return has been guaranteed for

repatriation outside Pakistan.

Cooperatives

Co-generation facilities with some of the industries such as sugar, textile and others, who have surplus power, are being encouraged and their surplus power will be purchased by WAPDA with reasonable incentive to the private owner. Rural industries which will have surplus power after meeting their own requirements have a standing offer for the purchase of such surplus power. Even a Group of industrialists can install power generating sets for their common consumption. For instance, at Chunian Estate eight factory owners are planning to make this arrangement and are in process of installing 22 MW diesel generating sets.

Proposals & Schemes

A number of proposals totalling about 3000 MW capacity have been received from the private sector so far. [right arrow] In the most advanced stage is the

proposal presented by Xenel Group of

Saudi Arabia along with Hawker

Siddelay of UK to install 4 units of 323 MW

capacity each, i.e. 1292 MW total, at

the mouth of the Hub River in

Balochistan near Karachi. Various agreements

have been negotiated and initialled

with the sponsors which include

agreements for Power Purchase,

implementation and fuel supply. Land Lease

Agreement has also been finalized.

However, Civil Contractors and

Turbine Generators suppliers withdrew

from the consortium. The Group has

now made arrangements to find new

partners in these fields and it is

expected that this project will be

discussed with the sponsors in the near

future with the new set-up. [right arrow] Another scheme in which feasibility

study has been received is from Fauji

Foundation who have proposed a 300

MW Plant at Bin Qasim Karachi.

However, one of their joint venture

partners, M/s Bab-Cock and Welcox,

has backed out. Efforts are being made

by the Foundation to explore

substitute partners. [right arrow] A consortium consisting of ABTECH of

Pakistan and Techno-prom- export of

USSR with equity participation of

WAPDA has submitted an offer to

install 4 units of 210 MW power project

840 MW total at Jamshoro near

Hyderabad. A feasibility study is expected in

the very near future. A letter of support

is being issued shortly for execution of

various agreements enabling the

consortium to take up the project in hand. [right arrow] Letter of Intent has been issued to M/s

Intrag and Lobe of USA to install 105

MW combined cycle power plant based

on low heating value gas at Kabirwala

near Multan. [right arrow] A letter of support is being shortly

issued to M/s Hawkins Tenaska of

USA for conducting a detailed

feasibility study for putting up 400 MW

combined cycle plant at Uch Gas Field. [right arrow] There are various other proposals at

different stages of implementation for

which response from other side is

awaited. They include installing 120

MW diesel generating units at

Nooriabad Industrial Estate, 30 MW Coal

Fired Unit with fluidized bed

combustion at Salt Range Punjab, Pakland/Pyropower/Bechtel

130 MW plant

based on Lakhra Coal, 6 MW Hydel

station at Balloki-Sidhani Link canal at

Tail and 130 MW Allai Khawar (NWFP)

hydro-electric project proposed by

Fecto group.

It may be appreciated that the induction of private sector into the field of power generation is new activity not only in Pakistan but also in the world. It is, therefore, natural for it to take time before accelerating into a fast developing venture. The whole process is moving forward through the vehicle of negotiations in which all concerning parties are gaining confidence as well as experience. It is hoped that once a few of the projects under private sector are materialized, and precedents are available, smany more Private Sector Plants will follow.
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Article Details
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Author:Akbar Khan, Zahid Ali
Publication:Economic Review
Date:Mar 1, 1991
Words:1307
Previous Article:WAPDA - in retrospect.
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