Meeting shortages

Feb 26 - Mar 04, 2007

Demonstrating its commitment, the government is currently employing all its resources, financial as well as physical, to meet the electricity shortages the country is likely to face in a year or two. Necessary policy measures are also in place to ensure reliable and sustainable addition to power generation capacity, on a long-term basis, in the wake of enhanced nationwide economic activities that have placed premium on power demand.

In response to the Power Policy-2002, as many as 47 power projects of the cumulative capacity of over 11,600 MW are to be constructed and commissioned by the private sector during 2007-2016. In addition, the Water and Power Development Authority (WAPDA) has been allowed to establish a number of thermal power plants of a total capacity of about 1,000 MW. Another 325 MW capacity nuclear power project will take off by the end of this year, while wind-farm power generation units of at least 100 MW capacity will be operational soon. Likewise, Karachi Electric Supply Corporation (KESC) has announced its plan to add 600-MW electricity to its existing system within few years.

Today, the total installed capacity for power generation is 20,456 MW, whereas de-rated/dependable power generation works out to be nearly of 18,800 MW capacity. In relation, total peak demand at national level is 15,300 MW (during summer season). Thus at present there is no shortage of power, even after taking into account the huge theft and line losses. Demand-supply projections, however, suggest that under present conditions and at 8% annual growth rate, there would be power shortage of 1,300 MW by the year 2008.

To meet the challenge, the government has adopted a three-pronged strategy. Firstly, all efforts are being made to remove irritants to enable the new Independent Power Producers (IPPs) to start construction of the respective projects without further delay. Secondly, WAPDA has been asked to put up two thermal power plants urgently on rental basis. Thirdly, fast track projects have been allowed, based on new and used/refurbished equipment, primarily on reciprocating (diesel) engine technology.

Against the projected additional demand of 1,300 MW, the IPPs alone - of cumulative capacity of 2,730 MW - are scheduled to come on stream by the last quarter of 2008/first quarter of 2009. Orient Power, the first project being implemented under the Power Policy-2002, has achieved financial close in December 2006 and construction at site is in progress. The 225 MW capacity dual-fuel project, using pipeline quality natural gas for 9-month period, is being located at Balloki, Punjab, and is scheduled to be operational by October 2008. The project sponsors have rich experience of operating in foreign as well as domestic power sectors, with a successful track record, thus ensuring that the project meets the deadline and performance criteria.

Hallmore's Bhikki power project of 225 MW capacity, based on dual-fuel combined cycle technology, has achieved financial close in February 2007, and the project will be operational by December 2008. The other two projects scheduled to achieve commercial operation by December 2008 are Sapphire Group's Muridke Power of 225 MW to be operated on natural gas and Warda Power's 200 MW oil-based project near Lahore. The projects" sponsors are in advanced stage of securing financial close, prior to commencing the construction activities.

The well-known Saifullah Group of Companies, which is actively engaged in energy sector, is setting up Saif power project of 225 MW capacity at Sahiwal. Within a short period after obtaining approval of the feasibility study, the sponsors have signed the security package documents and now expect to achieve financial close sometime in March 2007. The dispersal of power from the plant to the WAPDA transmission system is scheduled by March 2009, for which power sale/purchase agreement has been concluded in January this year. The plant will operate on natural gas, using oil as alternate fuel, employing gas turbine technology.

Originally, the policy in vogue has not only encouraged the use of indigenous energy resources, such as gas, coal, waterpower and wind-power, but it also prohibited setting up any furnace oil/HSD-based projects, primarily for the reasons of higher operating cost and heavy dependence on imports. Realizing the emergent need to bring power projects on stream, the government has relaxed this condition, now promoting a limited number of oil-based projects on diesel engine technology, which has short gestation period compared to gas turbine technology. Nonetheless, the Economic Coordination Committee (ECC) of the Cabinet had decided on January 4, 2006, that no further proposals for oil/gas based power projects would be entertained by the Private Power and Infrastructure Board (PPIB) without prior approval of the government.

AttockGen Power of 150 MW capacity is the pioneering oil-based project being implemented under the Power Policy-2002, though its fuel will still be an indigenous resource. To be established within the premises of Attock Refinery Ltd at Morgah, Rawalpindi, the Attock Group of Companies has sponsored the project. Though expected to achieve financial close by June 2007, it would be the first project under the policy to generate and sell electricity by August 2008.

The strategic decision of the government to invite the existing IPPs for capacity expansion will pay dividend, as fast track projects of another 400 MW will be operational by March 2009 under the programme. Likewise, leading businessmen have agreed, responding to an initiative taken by Prime Minister Shaukat Aziz, to establish green-field power plants of a total capacity of 600 MW, which are scheduled to achieve the commercial operation date (COD) by March 2009. A number of amendments in the policy were thus made by the ECC of the Cabinet, extending additional fiscal and financial benefits to the prospective investors.

Not being certain about sponsors" continued seriousness to put up all the power projects within the agreed timeframe, the government has also allowed, taking care of slippage of the planned projects, many fast-track projects based on second-hand or refurbished equipment. These include 179-MW Gulf Power at Sahuwala, Taiyo Hills at Lahore and Glimmer at Pasrur of 150 MW capacity each. The regulatory authority, NEPRA, has already determined electricity tariff for these projects. These oil-based projects on diesel-engine technology will achieve the COD by October 2008.

Private Power and Infrastructure Board has drawn an ambitious power generation expansion plan, with indicative commissioning date for each project, and the progress is regularly monitored. It has been successful in attracting investment, foreign and local, to the tune of US$ 10 billion, under the policy. There are another seven thermal power projects of combined capacity of 1,320 MW based on pipeline quality gas, dedicated gas and oil, which are scheduled to commence commercial operations in the year 2010. The hydel power projects will go on stream in private sector from 2010 onward, with the first project of 84-MW capacity, namely New Bong Hydel Power, to be operational by August 2010, followed by 100-MW Kotli Hydel Power. A series of coal-based power plants, of cumulative capacity of 1,550 MW, are scheduled for operation in private sector in 2012.

At the same time, the public sector has not been lagging behind to contribute in augmenting power generation capacity, as power projects of a cumulative capacity of about 1,000 MW will be on stream by end-2008 and others of a total of 450 MW capacity by the year 2009. WAPDA's two thermal power plants acquired on rental basis will be operational by April/May 2007. The 150-MW rental plant at Lahore is currently under trial runs, while the other of 130 MW capacity to be located at Bhikki is on high seas. Also, a 400-MW capacity combined cycle power plant is being established by WAPDA at Chichoki Mallian, District Sheikhupura, which is targeted to produce electricity by September 2008. A 100 MW thermal power plant will be set up by WAPDA at Khuzdar, Balochistan. Likewise, Malakand-III hydropower project of 81 MW capacity, being constructed by the NWFP government, is nearing completion and will generate power by January 2008.

Besides undertaking expeditious completion of its on-going hydel power projects, namely Duber Khwar, Allai Khwar and Khan Khwar, of an aggregate capacity of 400 MW or so, WAPDA is all set to commence construction of another five hydroelectric power projects to generate about 1,000 MW electricity additionally. Pursuant to implementing President Pervez Musharraf's Water Vision, at least three mega hydropower projects in the public sector, including Diamer-Basha dam, are scheduled for completion by 2016.

Strengthening and widening the electricity transmission and distribution systems remain the sole responsibility of WAPDA (excluding KESC system). Accordingly, major revamping, modernization and expansion of WAPDA's existing transmission and distribution network is currently being undertaken, ensuring dispersal of additional power generated in near future. Asian Development Bank has recently extended a loan amounting to US$ 800 million for the purpose, to be utilized for transmission/distribution schemes undertaken during 2007-2016 period.

The power scenario of Karachi is complex and different from the rest of the country. The demand for electricity in the metropolis is growing at a fast pace but there seems to be no respite to the residents in near future due to a number of factors. First, KESC's transmission and distribution system is not capable of taking any additional load, and it has so far not shown any keenness to invest in rehabilitating and strengthening the network. Second, KESC has failed to achieve any physical progress on the implementation of its generation capacity expansion plan announced last summer, so as to balance the demand and supply position.

It is intriguing to note that the privatized KESC has refused to purchase electricity from the two gas-based IPP projects planned to be located in Karachi that were originally scheduled to start operations by 2007. These are Tapal Group's Western Electric Power and Fauji Foundation's Fauji Korangi Power, each of 150 MW capacity, which are being relocated elsewhere in Sindh aiming to supply power to WAPDA now. Sadly, it suites KESC well to continue to "import" electricity from WAPDA, which is cheaper compared to the IPPs, and practically obtained on "long-term credit", thus fully exploiting the Karachi power situation, particularly during peak load. Currently, KESC owes a hefty sum of Rs 13 billion to WAPDA since its divestment and change of ownership, and there appears to be no possibility of KESC clearing its dues soon.

Indeed, there are visible signs that future holds enough, maybe more, power for the nation in a bid to meet the short, medium and long term electricity requirements. But will the electricity be affordable too? Only time will tell.

--The contributor, former Chairman of Heavy Mechanical Complex (Pvt) Ltd, Taxila and other state-owned engineering companies, is currently on the Board of Directors of the Private Power and Infrastructure Board (PPIB) and National Engineering Services Pakistan (Pvt) Ltd (NESPAK).

































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By year 2010 additional power required will be 5529 MW.
The additional power generation will need an investment of about 4/5 billion dollars for five years (2006-2010).