FOREIGN INVESTMENT IN ENERGY SECTOR
Vibrant energy sector likely to attract $11 billion in next five years
From SHAMIM AHMED RIZVI,
Mar 21 - 27, 2005
The vibrant energy sector is likely to attract foreign investment well over $11 billion during the next five years in Pakistan.
The assessment regarding forthcoming investment in the energy sector was made by Liaquat Ali Khan Jatoi, Federal Minister for Water and Power in Islamabad last week.
Outlining the overall picture of the energy sector, he disclosed that besides an investment of over $3 billion, which was currently in the pipeline, the international energy players from the United States and the UK have also come up with a plan to invest dollar one billion in two different energy projects.
The flow of foreign investment in the energy sector was actually the outcome of the efforts being made by the government with a focus to meet the growing energy demand especially the power in the country.
Prime Minister Shaukat Aziz, while talking to the minister for Water and Power in a recently held meeting at Prime Minister's house underlined the need for large scale investment in the energy sector to match the energy requirement of the country.
With the accelerated economic activities, the demand for power will naturally increase. In the backdrop of the growing economic activities, Pakistan needs to act in a pre-emptive manner to ensure that the equation between demand and supply was not impaired due to scarcity of energy resources. There was an ample scope for investment in the power sector especially in view of lucrative returns offered by this vibrant sector of the economy. During a meeting, the Minister for Water and Power spelled out the aggressive marketing campaign launched by Pakistan including the road shows on investment potential in power plants recently organized in Dubai and his meetings with leading investors of Middle East and the European Union.
According to Liaquat Jatoi, an American company AES has shown interest in developing and implementing 1,000MW coal-based power project in Thar, which would bring an investment of over US$ 1 billion.
Similarly, a British company Globe leg has also announced to invest US$ 1 billion in the power sector, while a bidding for the Neelum Jhelum Hydel Power Project is also scheduled on April 30. Applications for international bidding of this project will be received till April 15. The cost of the project having a generation capacity of 969MW was estimated at $1 billion.
The road shows staged in Dubai and London has succeeded in inviting the attention of the investors towards power sector in Pakistan. The attractive features of the three major projects presented in the road shows were of the special interest of the investors: These three projects are including Uch Two power project with 400-500MW, Faisalabad (oil/gas) Power Project of 450MW and Lahore dual-fuel Power project with a capacity of 350-400MW. The estimated cost of Uch-2 project is US$ 375 million, Faisalabad project $360 million while the cost of Lahore project is $ 320 million.
In addition to these three major projects, several other small and medium hydel power projects were also presented in the road shows with a total capacity of about 1800MW along an estimated investment of US$ 2.25 billion. Besides gas and hydel projects, investment opportunities in five coal blocs were also highlighted.
Pakistan was set to attain a growth rate of 8 percent during the next three years as against 7 percent in the current fiscal and 6.4 percent of the last year. The increase in growth rate was in fact a reflection of the growing economic activity in the country, which when compared with the growth rate of the 90s, having dramatically changed the economic scene in Pakistan. Macroeconomic stability and structural reforms as pursued by the government have been instrumental in breaking the vicious cycle that had been eroding the fundamentals of the economy. Credit for bringing an economic turn around, however, goes to the dynamic financial and economic vision of Prime Minister Shaukat Aziz.
However, the economic managers will have to ensure effective implementation and follow up of this attractive economic decision so that the flow of investment was not disturbing in the days to come.
The Prime Minister's focus on energy appears to be a manifestation of his resolve to take the growth to 8 percent which will definitely result in increase of demand for energy in foreseeable future. Unfolding his 5 years development strategy about two weeks back, the Prime Minister had disclosed that augmentation of the energy resources was the priority area of the development plan. "Providing adequate water was of the highest order both for drinking and irrigation purposes."
The significant role of electricity, gas and hydrocarbon has to be accorded with due recognition, as the economic growth is tied up with the growth of the energy resources in the world economies. The only area which needed to be given special attention by the people at the helm of affairs was the affordability of the power price in Pakistan as an expensive energy may not produce the desired results.