Hyundai Heavy Industries and Pakistan's Yunus Brothers to Develop Windfarm at Sindh

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Researched by Industrial Info Resources (Sugar Land, Texas)--A South Korean consortium led by Hyundai Heavy Industries Company Limited (SEO:009540) (HHI) (Ulsan, South Korea) will collaborate with Yunus Brothers (Karachi, Pakistan), Pakistan's leading export house and manufacturer of textiles, for the YUNA project, which entails development of a 50-megawatt (MW) windfarm at Sindh, in the southern region of Pakistan.

The windfarm will consist of 30 wind turbines, each with a capacity of 1.65 MW. The units will be manufactured at HHI's facility at Gunsan, in South Korea. Beginning mid-2010, the project is expected to cater to the electricity requirements of 60,000 households. While HHI states that the project is scheduled for completion by the middle of this year, the Korea-Trade Investment Promotion Agency (KOTRA) (Seoul, South Korea) has reportedly stated that construction of wind power generators, worth about $52.7 million to $70.2 million, would start next year.

The consortium, comprising Korea Southern Power Company Limited (KOSPO) (Seoul, South Korea), Hyundai Corporation (SEO:011760) (Seoul) and Hyundai Engineering & Construction Company (SEO:000720) (Seoul), was set to sign a memorandum of understanding with Yunus Brothers on January 25. KOSPO is a subsidiary of Korea Electric Power Corporation (NYSE:KEP) (Seoul). The partners will establish a special purpose company for the project, with Yunus Brothers holding a 51% stake and the HHI-led consortium holding 49%. In addition to supply of wind turbines and core equipment, HHI also will incur profits through sale of electricity from the windfarm.

The YUNA project will be implemented under the aegis of the Pakistani government's Alternative Energy Development Board (AEDB) (Islamabad, Pakistan) and is expected to alleviate the chronic power crisis in the country. In December 2006, the Pakistani government approved the Policy for Development of Renewable Energy for Power Generation. According to renewable energy targets drawn up by the government, Pakistan was to develop 700 MW of wind power generating capacity by 2010, augment it to 3,730 MW by 2020 and to 9,700 MW by 2030, in order to meet 5% of its total installed capacity at the time through renewable sources of energy. Based on data from the Pakistan Metrological Department, the AEDB assessed that the coastal belt of Pakistan has a wind corridor that is 180 kilometers long and 60 kilometers wide, and that alone has a wind power generation potential of 50,000 MW. The total wind power generation potential in the country has been estimated at 346,000 MW. The average wind speed along Pakistan's coastline, which stretches over 1,046 kilometers, is estimated at more than 8 meters per second.

In November last year, the European Investment Bank (Luxembourg) said that it would provide 100 million euros to Pakistan as part of the government's $2.2 billion multi-year program to develop the nation's renewable energy sector. The program enjoys technical assistance, as well as $510 million of financial support provided by the Asian Development Bank (ADB) (Manila, Philippines).

Critics argue that in pursuit of power generation targets to alleviate a power crisis in the short run, the government has largely sidestepped issues such as transmission and distribution losses, theft, circular debt, non-payment of bills and a much-needed long-term policy, thereby trying to feed more electricity into a defective system rather than fixing the system itself. The Pakistani Cabinet's approval, accorded in August 2009, for 14 rental power projects (RPPs) with a combined generation capacity of 1,500 MW is a good case in point. In a recent report, the ADB observed that these projects would not alleviate load-shedding in the country, and pointed out several legal inconsistencies in the rental service agreements, and violation of regulatory procedures. The report observed that about 2,000 MW of power generation capacity could be utilized within the existing system through full-capacity utilization of 997 MW of idle plants and energy conservation measures that could yield an additional 1,300 MW of power. The report further states that development of RPPs as an emergency solution would only lead to a financial burden of up to $2.4 billion on the government and lead to an increase of 87% in customer tariff within two years.

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