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Scope of the 2002 Policy covers Private, Public-Private, and
Public sector projects
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Exploitation of indigenous resources including hydel, coal,
gas and renewable resources through active involvement of
the local engineering, design and manufacturing capabilities
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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
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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)
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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
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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
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'Hydropower'
projects on BOOT basis;
'Thermal' projects
on BOO basis
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Balanced risk profile for investors, lenders and government
agencies through time-tested institutional and legal
framework
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Independent Regulator for balancing interests of consumers
and power companies
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Multi-Year, Long-term Tariff approved by the regulator NEPRA
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Attractive and competitive return on investment allowed by
the NEPRA
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Long-term Security Package including Implementation and
Power Purchase Agreements, and Water Use License (for
Hydropower Projects)
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Two-part tariff structure consisting
of fixed 'Capacity' and variable
'Energy' components
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Capacity Payments
to cover fixed costs, i.e. Fixed O&M, Debt Servicing, and
Return on Equity (ROE); independent of project/energy
despatch
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5% concessionary Customs/Import Duty on Plant & Equipment
not manufactured locally
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No levy of Sales Tax on such plant, machinery, and equipment
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Exemption from corporate
Income Tax and Turnover Tax
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Exemption from
Withholding Tax on
imports
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100% foreign ownership allowed with minimum 20% equity
contribution requirements
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Sponsors can divest equity after six (6) years of project
commissioning
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Conversion of Pak Rupee and remittance of Foreign Exchange
for project-related payments ensured by GOP
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Performance obligations of Power Purchaser and Provinces/AJK
guaranteed by GOP
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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
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Responsibility of power transmission facilities rests with
the Power Purchaser
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Continuity of payments in case of Political Force Majeure
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Pass-through of additional taxes/costs incurred due to
Change in Law
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Adjustments in Tariff for changes in Benchmark Interest
Rates (LIBOR/KIBOR)
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Compensation Payment in case of project termination due to
GOP default
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Foreign
component of fixed and variable O&M Cost to be indexed with
US CPI
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Term of
concession period for hydropower projects is up to 50 years
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For hydropower projects,
Hydrological Risk
to be borne entirely by the Power Purchaser
(WAPDA/NTDC/KESC)
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For hydropower
projects, tariff adjustment based on the following four
tariff re-openers is allowed
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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
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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
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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
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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
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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
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For foreign O&M
costs, adjustment for exchange rate variations between Pak
Rupee and US Dollar have been allowed
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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)
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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
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ROE will be
adjusted for variations in US Dollar / Pak Rupee rates
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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
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The following
Fee Structure is currently applicable to projects processed
under the 2002 Policy:
