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Shah Jahan Mirza Managing Director PRIVATE POWER & INFRASTRUCTURE BOARD September 30, 2015

OVERVIEW OF PAKISTAN POWER SECTOR AND ROLE OF IPPs. Shah Jahan Mirza Managing Director PRIVATE POWER & INFRASTRUCTURE BOARD September 30, 2015. 1. CONTENTS. Overview of Pakistan’s Power Sector (PPS) Plans to Enhance Power Generation Capacity and Allied Infrastructure

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Shah Jahan Mirza Managing Director PRIVATE POWER & INFRASTRUCTURE BOARD September 30, 2015

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  1. OVERVIEW OF PAKISTAN POWER SECTOR AND ROLE OF IPPs Shah Jahan Mirza Managing Director PRIVATE POWER & INFRASTRUCTURE BOARD September 30, 2015 1

  2. CONTENTS • Overview of Pakistan’s Power Sector (PPS) • Plans to Enhance Power Generation Capacity and Allied Infrastructure • PPIB – A One-Window Facilitator • IPP Model being executed by PPIB • Private Power Projects in Operation • Investment Initiatives • Salient Features/ Incentives under Power Policy 2015 2

  3. PAKISTAN POWER SECTOR - TIMELINE JOURNEY • Initially two vertically integrated utilities i.e. WAPDA and KESC, were responsible for generation, transmission and distribution in their areas • UPTO 70s:Performance of KESC and WAPDA was very good • IN 80s:Some deterioration observed. Demand-Supply shortfall started • IN 90s:Budget constraints lead the government to seek involvement of private sector in power generation projects • 1992:Govt. prepared strategic plan to reform Pakistan power sector • 1993:Energy Task Force created, Power Policy 1994 formulated • 1994 :Creation of PPIB & preparation of National Power Plan by WAPDA • 1997:Autonomous regulatory body NEPRA created, through an Act. • 2001:WAPDA Vision 2025 prepared • 2002:NEPRA issued a future plan for Pakistan Power Sector • 2005 :Medium Term Development Framework (MTDF) prepared 3

  4. OVERVIEW OF PAKISTAN’S POWER SECTOR • At present the following entities are responsible for delivery of power to the end consumers: • One Transmission and Dispatch Company (NTDCL) • Ten Distribution Companies (DISCOs) • Four Public Sector Generation Companies (GENCOs) • Thirty One (31) IPPs • The Electricity Generation is blend of Hydel and Thermal Units. • Total installed capacity is around 25,000 MW with 53% and 47% Share of Public and Private Sector respectively. • Currently Country is facing deficit of around 6,000 MW in peak summer months whereas the power demand has been growing by 6-7% per annum resulting into load shedding of 8-16 hours. • Expansion in Transmission Network is required to evacuate power from upcoming projects. • Due to Financial Constraints in the Public Sector, the GOP is focusing on private sector to invest in PPS to bridge the electricity demand supply gap. 4

  5. Provinces Private Sector IPPs (Hydel, Oil, Gas, Coal) Khyber Pukhtoon Khwa CPPs Punjab KESC Sindh Balochistan PAKISTAN POWER SECTOR – KEY PLAYERS AJK Gilgit Baltistan IPPs/ SIPPs (Small Hydel, Wind, Solar, Bio Diesel, Bio Mass, Cogeneration) 5

  6. PAKISTAN POWER SECTOR - TOTAL INSTALLED CAPACITY MW % Public Sector Hydel 7,013 28 Thermal 5,458 22 Nuclear 787 3 Total 13,25853 Total 24,953 Private Sector IPPs 9,273 37 KESC 2,422 10 Total 11,69547 Total Installed Capacity 24,953 MW Source: Power System Statistics – 39th Issue 6

  7. PAKISTAN ENERGY MIX - VERSUS WORLD ENERGY MIX 7

  8. PAKISTAN POWER SECTOR – CURRENT SCENARIO • In the peak summer months, electricity demand-supply gap reaches up to 6,000 MW resulting in load-shedding of up to 8-16 hours per day • WAPDA (NTDC) Power Planning has projected a demand of 31,757 MW by the year 2020 • Even if the maximum capability of 18,477 MW is assumed, country would need additional 13,310 MW (net) by the year 2020, requiring an investment of $15 billion • The government is looking towards private sector to bring additional generation on coal, hydro and renewable energy on fast track basis • In order to encourage private sector, the government has been issuing various policies/ guidelines from time to time in the past at both federal and provincial levels 8

  9. PLANS TO ENHANCE POWER GENERATION CAPACITY AND ALLIED INFRASTRUCTURE • The Present Government is striving hard to overcome the ongoing power crisis which has adversely impacted the National Economy. • A number of initiatives are in progress to enhance generation capacity of the system, including power plants based on coal, hydel, gas and renewable resources, both in public as well as private sector. • The GoP has recently approved Power Generation Policy 2015 which provides attractive incentives for private investors • Extensive networks of high voltage transmission lines and grid stations are being developed to evacuate power from upcoming mega coal and hydel projects to be located southern and northern part of country. • The GoP has approved Private Transmission Line Policy for allocating private investment in high voltage transmission lines 9

  10. PPIB - A ONE WINDOW FACILITATOR • Created in August 1994 as a one-window facilitator on behalf of GOP, its Ministries/ Departments to promote private investments in power sector • Received statutory status on 6th March 2012 by an Act of the Parliament • Approves IPPs and executes Implementation Agreements and provides GOP guarantees on the name of President of Pakistan • Facilitates IPPs in executing PPA, FSA/GSA WUA with relevant GOP agencies • Coordinates/ Liaisons with local and international multilateral development/ Financial Institutions • Out of a total of 31 IPPs, PPIB managed to induct 29 (IPPs) totaling 6,142 MW with an investment of around US$ 7 billion. • Attracted leading international/ local investors and lenders to the Pakistan Power Sector • Succeeded in commissioning of first Hydel IPP in Pakistan and AJ&K i.e. 84 MW New Bong Escape Hydropower Project 10

  11. IPP MODEL BEING EXECUTED BY PPIB CSA: Coal Supply Agreement GSA: Gas Supply Agreement PPA: Power Purchase Agreement IA: Implementation Agreement DIA: Direct Implementation Agreement GoP PPIB Provincial Govt./ AJ&K Lenders Tripartite LOS DIA LOI/ LOS/ IA WUA/ CSA Financing IPPs GSA/ FSA PPA Gas/ Fuel Supplier NTDC Tariff/ Generation Licence Transmission Licence EPC /O&M Contracts Fuel Price OGRA EPC/ O&M Contractors NEPRA

  12. PRIVATE POWER PROJECTS IN OPERATION • Number of Capacity Investment Projects (MW) (Million US$) • Project prior to 1994 Power Policy 1 1,292 1,608 • Projects under 1994 Power Policy 153,1243,490 • Project privatized from public sector 1 1,638 1,583 • Project under 1995 Hydel Policy 1 84 215 • Projects under 2002 Power Policy 132,9343,248 • Total 319,07210,144 12

  13. PRIVATE SECTOR PROJECTS IN OPERATION AZAD JAMMU & KASHMIR Tot. Capacity: 9,072 MW PUNJAB BALOCHISTAN SINDH 13

  14. INVESTORS AND LENDERS PARTICIPATING IN PRIVATE POWER PROJECTS 14

  15. NEW INVESTMENT INITIATIVES (RLNG Projects) (1/4) • 3,600 (2 x 1200) MW Power Generation Projects based on R-LNG, to be commissioned 2400 MW open cycle by May 2017; completion of 3600 MW early 2018 • National Power Parks Management Company Limited (NPPMCL) under Ministry of Water & Power is in the process of development of two (02) R-LNG based power plants each of around 1000-1200 MW at Balloki and Haveli Bahadur Shah, in the province of Punjab • The Government of Punjab is developing a 1200 MW R-LNG based power project at Bhikki, Sheikhupura through a special purpose company with the name and title of Quaid-e-Azam Thermal Power (Pvt.) Ltd. (QATPL) • Recently, NEPRA has announced Upfront Tariff for the LNG based power plants 15

  16. NEW INVESTMENT INITIATIVES (In progress private sector Hydel Projects) (2/4) • Solicitation of Project Proposals for establishment of: • 80 MW Neckeherdim-Paur Hydropower Project, YarKun River, Chitral Valley, KPK • 350 MW Athmuqam Hydropower Project, Neelum River, AJ&K • Key Projects requiring support in areas of Equity Participation, EPC Contract, O&M Contract, Electro-Mechanical Equipment Supply and Lending/ Financing: • 640 MW Azad Pattan Hydropower Project, Jehlum River, Sudhnoti, AJ&K • 500 MW ChakothiHattian Hydropower Project, Jehlum River, Muzaffarabad, AJ&K • 548 MW Kaigah Hydropower Project, Indus River, Kaigah, KPK • 157 MW MadianHydropower Project, Swat River, Swat, KPK • 215 MW Asrit-KedamHydropower Project, Swat River, Kalam, KPK 16

  17. WAPDA HYDEL PROJECTS (UNDER IMPLEMENTATION) • 969 MW Neelum Jhelum Hydropower Project, Neelum River/ Jhelum River, near Muzaffarabad, AJ&K • 4,320 MW Dasu Hydropower Project, Indus River, District Kohistan, Khyber Pakhtunkhwa • 96 MW Jinnah Hydropower Project, Indus River, District Mianwali, Punjab • 121 MW AllaiKhwar Hydropower Project, Indus River, District Battagram, Khyber Pakhtunkhwa • 72 MW Khan Khwar Hydropower Project, Indus River, District Shangla, Khyber Pakhtunkhwa • 130 MW DuberKhwar Hydropower Project, Indus River, District Kohistan , Khyber Pakhtunkhwa • 22 MW Jabban Hydropower Project, Swat River, District Malakand (PATA) Khyber Pakhtunkhwa 17

  18. INVESTMENT INITIATIVES (Coal based Power Projects) (3/4) • At present, various local and imported coal based IPPs are under process with PPIB, most of which are being developed under the China Pakistan Economic Corridor (CPEC) • PPIB, after consultation with the stakeholders, has finalized and shared Security Package Documents with the Sponsors (Implementation and Power Purchase Agreements) • Moreover, the total potential of Thar is estimated at 175 billion tons of lignite coal which may be sufficient to produce 100,000 MW electricity for 200 years • NPERA has already announced Upfront Tariff for Indigenous Coal based Projects • Investors are encouraged to participate in development of power projects based on Coal and also propose new projects based on Coal 18

  19. PPIB’s PORTFOLIO OF UPCOMING PRIVATE POWER PROJECTS (IPPs) 19

  20. INVESTMENT INITIATIVES (Transmission Line Projects) (4/4) • Transmission Line and Allied Infrastructure Projects under the proposed Transmission Line Policy (to be announced shortly) • List of Transmission System projects to be offered to Private Sector will be prepared by GOP • Award of Projects through ICB and Upfront Tariff on BOOT basis • Policy to cover Transmission Line & Grid Station projects of 220 kV voltage level and above (EHVAC & HVDC) • Land & Legal Right of way to be provided by NTDC • Project Term: 25 years • Transmission utility (NTDC) to pay a fixed Transmission Service Charge, regardless of the quantum of energy transmitted • Exemption from Corporate Income Tax for first ten years including turnover rate tax and withholding tax on imports • Standardized Security Package (IA & TSA) • One Window facility by PPIB 20

  21. POWER GENERATION POLICY 2015 SALIENT FEATURES/ INCENTIVES (1/2) • PPIB /relevant entities in the Provinces / AJK / GB will provide a one-window facility for implementation of projects under the Policy. • Exemption from Corporate Income Tax, Turnover Tax, Withholding Tax and Sales Tax, only 5% concessionary Import Duty on plant & equipment not manufactured locally • GOP Guarantees obligations of power purchaser & provinces • GOP provides protection against Political Force Majeure, Change in Law and Change in Duties & Taxes • For Hydro Power Projects; WUC will be paid @ Rs. 0.425/kWh to the province where the project is located. • Power Purchaser to bear Hydrological Risk for Hydro projects 21

  22. POWER GENERATION POLICY 2015 SALIENT FEATURES / INCENTIVES (2/2) • Attractive ROE provided by the Regulator – Imported Coal: 27.3 ; Local Coal: 29.5; Thar Coal: 34.5; Hydro: 17% IRR (23% ROE) ; Gas/LNG: 15% IRR (18% ROE) • To mitigate high underground geological risk, long construction period and environmental sensitivities following tariff re-openers are provided by NEPRA • Cost Escalation in Civil and Cost Variation for E&M works • Resettlement Cost • Cost variation due to Geological Conditions limited to Tunnel Area • Tariff indexation for inflation (US CPI & Pak WPI) • Government ensures conversion of Pak Rupee & remittance of foreign exchange for project-related payments 22

  23. Backup Slides 24

  24. PPIB’s PORTFOLIO OF UPCOMING PRIVATE POWER PROJECTS (IPPs)

  25. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  26. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  27. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  28. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  29. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  30. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  31. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  32. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  33. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  34. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  35. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  36. PROGRESS OF ONGOING IPP PROJECTS BEING PROCESSED BY PRIVATE POWER & INFRASTRUCTURE BOARD (PPIB)

  37. Commissioned IPPs

  38. Commissioned IPPs

  39. Commissioned IPPs

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