INVESTMENT OPPORTUNITIES IN POWER SECTOR OF PAKISTAN

ENERGY MIX OF PAKISTAN

DEMAND-SUPPLY SCENARIO OF PAKISTAN

POLICY INCENTIVES FOR IPPs

POWER PLANTS

TRANSMISSION LINES

POLICY INCENTIVE FOR RENEWABLE ENERGY

SPECIFIC PROJECT OPTIONS

Sequence

OVERVIEW OF PAKISTAN’S POWER SECTOR

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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.

Hydel31%

Gas21%

Oil39%

LNG4%

Nuclear3%

Renewables2%

Current Fuel Mix

Solar2%

Import2%

Hy-del

26%Gas12%Oil

14%

LNG13%

Coal Local3%

Coal Im-

ported

20%

Nuclear3%

Wind4%

Fuel Mix 2019-20

PAKISTAN ENERGY MIX

Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20

17582

23107

17582

23500

18402

25145

19690

26905

21068

28788

12140

1728514174

2343420213

2709422940

28168 25077

30803

-5442-5822-3408

1811 1949 32501263

4009 2015

Power Demand and Supply

Peak Demand Available Generation Gap

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

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

PAKISTAN POWER SECTOR – CURRENT SCENARIO

6

PLANS TO ENHANCE POWER GENERATION CAPACITY AND ALLIED INFRASTRUCTURE

7

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

POWER GENERATION POLICY 2015 SALIENT FEATURES/ INCENTIVES

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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

POWER GENERATION POLICY 2015 SALIENT FEATURES / INCENTIVES

9

Attractive ROE provided by the Regulator – Imported Coal: 27.3 ; Local

Coal: 29.5; Thar Coal: 34.5; Hydro: 23% ROE ; Gas/LNG: 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

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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 as equity partner with existing

Sponsors in development of power projects based on Thar Coal and/

or propose new projects based on Thar Coal.

INVESTMENT INITIATIVES (Coal based Power Projects)

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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

INVESTMENT INITIATIVES (Transmission Line Projects)

NEW INVESTMENT INITIATIVES (RLNG Projects)

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3,600 (3 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

Tendering for all plants has been completed and contractors have

mobilized

02 projects being developed by Federal government while 01 by

government of Punjab

Equity participation in these plants is available for Russian investors

02 similar projects have been initiated at Jamshoro (600 MW) and

Guddu (1200 MW)

These 02 plants can be implemented on G-to-G basis with Russian

companies

• No customs duty or sales tax on import of equipment

• No Income Tax / withholding tax / turnover tax

• Repatriation of Equity along with dividends freely allowed

• Convertibility of PKR into USD

• Non-Muslims and non-residents exempted from payment of Zakat on dividends

Mandatory purchase of electricity by power purchaser

17-18% ROE

Government’s Sovereign Guarantee

Grid evacuation responsibility of power purchaser

Renewable Energy Policy 2006

Wind Energy

Five (05) wind power projects of 255.4 MW operational.

Nine (09) wind power projects of 477 MW are under construction.

14 wind projects of 664 MW in different stages of development.

Solar Energy

One (01) solar project of 100 MW installed.

Three (03) solar projects of 300 MW under construction.

31 solar projects of 711.44 MW in different stages of development.

Biomass Energy

Three (03) biomass cogeneration projects of 82.7 MW operational.

Eleven (11) biomass cogeneration projects of 333.4 MW in development stages.

Renewable Energy Projects

Wind: 340,000 MW (Theoretical)*

1396 MW in pipeline

Solar: 2,900,000 MW (Theoretical)*

Hydro (small/mini) 3,000 MW (Approx.)

Bagasse Cogen: 2,000 MW (Approx.)

Waste to Energy: 1,000 MW (Approx.)

Geothermal Potential yet to be determined

Alternative Fuels Potential being determined

• Initial macro level resource maps for wind and solar developed by NREL (USA).

• Resource mapping and spatial planning of solar , wind and biomass energy resources has been initiated with the support of the World Bank and ESMAP’s Renewable Energy Resource Mapping Initiative.

* Based on NREL study conducted in 2006.

Renewable Energy Potential

. . Dassu area Skardu districtGeothermal springsT: max: 71 °C

MurtazabadGeothermal springsT: 26 - 92°C

BudelasGeothermal springsT: 36 - 46°C

..Geothermal springNear the snout of Pechus Glacier

.Yasin District Hot Sulphourus spring

Geothermal springs located Within Reshun and Ayun fault domain

. ..Mushkin geothermal springT: 57 °C

Tatta Pani geothermal springT: 65,5 - 83 °C

.Bakkur thermal spring..Taunsa thermal spring

Zinda Pir thermal spring.Uch thermal spring

. Khashkeli thermal gradient3-3,5 °C/100 m.. Mangho Pir geothermal spring

T: 50,3 °C

Karsaz geothermal springT: 39 °C

.Talhar thermal gradient3-3,5 °C/100 m

.

Lakhra thermal gradient3,3 °C/100 m

.Koh-e Sultan thermal springsT: 25,6 – 34,8 °C

.Garm ab thermal spring

Kharan region (potential) geothermal system

.Geothermal springs at West of Dhadar, near Sanni

.Geothermal springs at the northof Zhob valley

.Geothermal springs at Harnai valley

Giandari Hot Spot .

GEOTHERMAL SPRINGSOF PAKISTAN

...

Seismo-Tectonic & Suture Related Systems

Geopressurised Geothermal Systems

Neogene-Quaternary volcanism related Systems

Project Under Study

• Diamir Basha Dam Project (4500 MW)

• Patan Hydropower Project (2300 MW)

• Thakot Hydropower Project (4000 MW)

Future Projects

• Yulbo Hydropower Project (2800 MW)

• Tangus Hydropower Project (2200 MW)

• Skardu Hydropower Project (1200 MW)

Hydel Power Potential

Thar Desert contains the world’s 7th largest coal reserves: 175 Billion Ton = 50 Billion TOE = 2000 TCF

Total Thar Coal Reserve More than Saudi Arabia 68 times higher than & Iranian Oil Reserves Pakistan’s total gas reserves

Sindh186 billion tons

Punjab235 million tons

Balochistan217 million tons

KP90 million tons

Azad Kashmir9 million tons

Thar

Coal Potential of Pakistan

• Thar Coalfield is declared as Special Economic Zone, and projects

of development of Thar declared as ‘Projects of National Security’

• 20% ($ Based) IRR to firms which achieve Financial Close before

Dec 2015 for Mine & Power Plants based on indigenous coal.

• Zero percent customs duties on import of coal mining equipment

and machinery including vehicles for site use.

• Exemption on withholding tax 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.20

Fiscal Incentives for Coal Projects

Scope of Work

• 500 kV Double Circuit Transmission Line from Hubco Coal Power Plant to Matiari (200km).

• Extension at 500 kV Matiari Switching Station (Two line bays with Shunt Reactor Banks)

Estimated EPC Cost

134MUS$

Expected Commissioning of Power Plant

December 2017

Financing Financing will be done through IFIs

PC-I Approval Status

PC-I submitted to MoW&P on 08.07.2015 and is under process with Planning Commission for approval of ECNEC

Completion 2017-18

Power evacuation from 1320 MW Hubco Project

Scope of Work

•+ 600 kV Bi-Polar HVDC T/L from Thar to Lahore (960km)

•HVDC Converter & Switching /Control Stations at Thar & Lahore

•Grounding Stations at Thar and Lahore

Estimated EPC Cost

1700 MUS$

Financing Financing will be done through IFIs

Approval Status

Not yet prepared

Completion 2020-21

Power Evacuation from Thar Power Plants

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•Pakistan’s Power Sector is Ready For

Investments in:

•Generation

•Transmission through wheeling

•Transmission Lines

•Distribution – through Privatisation

•Equipment and Materials

Investors are welcome

to avail investor friendly

profitable business

opportunities in

Pakistan’s Power

Sector

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