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  • Scope of the 2002 Policy covers Private, Public-Private, and Public sector projects

  • Exploitation of indigenous resources including hydel, coal, gas and renewable resources through active involvement of the local engineering, design and manufacturing capabilities

  • For projects above 50 MW, one-window support provided at the Federal level by PPIB, while for projects up to 50 MW one-window support provided at the Provincial/AJK level

  • For better coordination and implementation of the Policy, the Board of PPIB will have the Minister for Water & Power as its Chairman along with high-level representation of the Federal Government, Private Sector, Power Utility and Provinces/AJK (where items/projects pertinent to the particular Province/AJK from part of the agenda for the Board meeting)

  • Invitation of Tariff bids through International Competitive Bidding (ICB) - gas, oil, and dual-fuel projects to be awarded only on ICB basis; further, all projects for which feasibility studies are available will be offered on ICB basis

  • For raw hydel and coal site projects, EOIs will be invited through advertisement in press and Sponsors with the best proposal, as decided by the Board of PPIB, will be issued LOI for feasibility study

  • 'Hydropower' projects on BOOT basis; 'Thermal' projects on BOO basis

  • Balanced risk profile for investors, lenders and government agencies through time-tested institutional and legal framework

  • Independent Regulator for balancing interests of consumers and power companies

  • Multi-Year, Long-term Tariff approved by the regulator NEPRA

  • Attractive and competitive return on investment allowed by the NEPRA

  • Long-term Security Package including Implementation and Power Purchase Agreements, and Water Use License (for Hydropower Projects)

  • Two-part tariff structure consisting of fixed 'Capacity' and variable 'Energy' components

  • Capacity Payments to cover fixed costs, i.e. Fixed O&M, Debt Servicing, and Return on Equity (ROE); independent of project/energy despatch

  • 5% concessionary Customs/Import Duty on Plant & Equipment not manufactured locally

  • No levy of Sales Tax on such plant, machinery, and equipment

  • Exemption from corporate Income Tax and Turnover Tax

  • Exemption from Withholding Tax on imports

  • 100% foreign ownership allowed with minimum 20% equity contribution requirements

  • Sponsors can divest equity after six (6) years of project commissioning

  • Conversion of Pak Rupee and remittance of Foreign Exchange for project-related payments ensured by GOP

  • Performance obligations of Power Purchaser and Provinces/AJK guaranteed by GOP

  • The guarantee is also available to projects up to 50 MW; provided the Power Purchaser is a Federal entity and tariff is approved by NEPRA

  • Responsibility of power transmission facilities rests with the Power Purchaser

  • Continuity of payments in case of Political Force Majeure

  • Pass-through of additional taxes/costs incurred due to Change in Law

  • Adjustments in Tariff for changes in Benchmark Interest Rates (LIBOR/KIBOR)

  • Compensation Payment in case of project termination due to GOP default

  • Foreign component of fixed and variable O&M Cost to be indexed with US CPI

  • Term of concession period for hydropower projects is up to 50 years

  • For hydropower projects, Hydrological Risk to be borne entirely by the Power Purchaser (WAPDA/NTDC/KESC)

  • For hydropower projects, tariff adjustment based on the following four tariff re-openers is allowed

                  (a) Cost variation due to geology in the tunnel(s)
(b) Cost variation due to Civil Works
(c) Cost variation due to Hydraulic Steel Structure and M&E works; and
(d) Cost variation due to Resettlement Cost

  • Gas, oil and dual-fuel based projects to be awarded only on ICB basis; further, all projects for which feasibility has been prepared will be offered on ICB basis

  • For unsolicited proposals, NEPRA will determine tariff in consultation with the IPP and the power purchaser; while in case of projects located in AJK, sponsors will first negotiate tariff with the power purchaser and the power purchaser will subsequently apply to NEPRA for tariff determination

  • IPPs are not exposed to impact of exchange rate variation for US Dollar, Euro, Pound Sterling and Japanese Yen up to Commercial Operation Date (COD); EPC contracts denominated in these four currencies besides Pak Rupee are thus accepted by NEPRA

  • At COD, Capital Cost to be fixed in US dollars based on any of the four currencies of EPC contract accepted by NEPRA at the time of tariff determination, sources of financing, payments and actual exchange rates against rupee for these currencies

  • Foreign debt may be obtained by IPP in US Dollar, Pound Sterling, Euro and Yen; periodic adjustments in the Debt Service Component of tariff will be made to cover exchange rate variation for these currencies

  • For foreign O&M costs, adjustment for exchange rate variations between Pak Rupee and US Dollar have been allowed

  • NEPRA to base tariff determinations on firm, non-reopenable, competitive price duly initialed/signed by the IPP/EPC contractors (except for hydro and coal based projects)

  • Performance Guarantees to PPIB/GOP and Letters of Credit in favor of Power Purchaser to be accepted in Euro, Pound Sterling and Yen in addition to US Dollar

  • ROE will be adjusted for variations in US Dollar / Pak Rupee rates

  • The GOP does not guarantee payment obligations of the Fuel Supplier; however, nation-wide shortage of fuel oil would be recognized as a Pakistan Political Force Majeure Event

  • The following Fee Structure is currently applicable to projects processed under the 2002 Policy:

Description Fee US$
Registration Fee 200
Prequalification Documents (PQDs) Fee 1,500
Request for Proposals (RFP) Fee 2,500
Bid Evaluation Fee / Proposal Fee for Short-term Capacity Addition 20,000
Project Processing Fee at issuance of Letter of Support (LOS ) / Letter of Award (LOA):  
Unsolicited Projects 100,000
ICB Projects / Projects under Short-term Capacity Addition 80,000
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