Pakistan Cuts to the Power Chase with 50 Projects in Queue and $580 Million Network Upgrade

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). Developing countries are adept at creating and reinforcing bureaucratic webs to ensnare and slow down the outside investors they have been assiduously wooing. Macro project targets are announced by government agencies, and then the rulebook is thrown at anyone trying to expedite the process. The labyrinths of permitting and patronage are designed to protect scarce white-collar jobs and allow percolation time for corruption. This Catch 22 process, with a well-greased smile, is often condoned and encouraged by potential investors and their governments, who prefer the devil they know, and can control, over open tender and competition.

It is, therefore, a contrary and positive indicator that, in Pakistan's case, the minister for water and power, Liaquat Ali Jatoi, has directed that procedures, which were spelled out at great length in the country's 2002 power policy, should be simplified, along with the time frame for processing power projects. He stressed the need for result-oriented policies and attitudes.

The directive was made to the Private Power and Infrastructure Board (PPIB). The process of approving and installing new projects has taken a minimum of 5-6 years. Current generating capacity is around 18,000 MW, with thermal plants using oil, natural gas, and coal accounting for about 70%, hydroelectric plants, 28%, and nuclear plants, 2.5%.

The PPIB had reported that generation proposals received covered 3,477 MW of new capacity, with an estimated investment of $3.6 billion, of which hydropower projects represented 1,064 MW capacity, with an estimated investment of $1.6 billion. Under the 2002 policy, hydro projects will be implemented on a BOOT (build-own-operate-transfer) basis, and thermal projects on either a BOOT or BOO (build-own-operate) basis. Incentives for incoming investors include 5% customs duty on imported machinery and plant, broad tax holidays covering income tax, turnover tax, exemption from duties and local taxes, plus security guarantees.

It is reported that currently there are more than 50 national and international power companies seeking letters of intent from the PIBB to open power plants in Pakistan. The projects director of the PIBB has said that all stakeholders concerned would be consulted before letters of intent are issued.

Pakistan is facing a chronic annual power shortfall of 1,000 MW from 2007 onwards, with demand rising at a rate of between 6% and 7% a year.

The Water and Power Development Authority (WAPDA) generates more than half of the country's power. The Karachi Electric Supply Corporation (KESC) is the sole supplier to the capital, with a capacity of 1,250 MW, which falls about 900 MW short of demand, leading to 'rolling blackouts' (load shedding). About 31% of the total power generation is from private producers under a partial privatization plan with rates determined by the National Electric Power Regulatory Authority (NEPRA), with disputes over adjustments breaking out frequently.

With the power distribution network suffering from low maintenance and power theft (up to 30%) WAPDA is planning to spend $580 million on network upgrades through 2005 under the System Augmentation Program (SAP). Under this program, line losses will be decreased and 6,714 kilometers of high tension (HT) and low tension (LT) lines would be bifurcated and reconstructed, and 759,825 power meters would be replaced, the Karachi Daily Times reported at the beginning of September.

A number of large-scale hydro projects are at various stages of development. The $2.25 billion, 1450 MW Ghazi Barotha plant is now operating at full capacity. The 969 MW Neelum-Jhelum has gained $1.2 billion support from a Gulf-based consortium, after China had refused to fund the project until its ongoing projects in Pakistan were completed. Under the Indus Water Treaty, the country starting the first project has priority rights to the Neelum waters - which has spurred the Pakistani project.

The $1 billion Munda project has the backing of the U.S. based, AMZO Corporation (Maryland), which consists of a company of Pakistani nationals, who have commissioned Lahmeyer International (Frankfurt, Germany) as project management consultants.

The massive $5.5 billion Kalabagh project, which could generate 3,600 MW, is still mired in permitting and environmental problems in the state of Singh. The Chinese company, Dongfang Electric has the construction contract for the smaller 96 MW, $128 million Kalabagh-Jinnah power plant situated five kilometers downstream from Kalabagh on the side of the existing Jinnah Barrage. Other Indus-based projects – Basha, 3,360 MW and Dasu, 2712 MW are still ‘upstream’ in terms of final project schedules.

With the two nuclear empowered neighbors, Pakistan and India, at least talking to each other, it is in the interests of regional and world security that the new WAPDA "must do – can do” approach is successful, and power security gives Pakistan a growing industrial base and continuous power for the 150 million plus population who have been living on the edge in many ways for a long time. Pakistan is roughly twice the size of California including mountainous and arid regions.