FREQUENTLY ASKED QUESTIONS
1. What does IPP stands for ?
IPP is an abbreviation of Independent Power Producer.
2. How many IPPs facilitated by PPIB are functional in Pakistan ?
3. Why has private sector been inducted in power generation?
Power shortage had been one of the chronic problems hampering Pakistan’s socio-economic growth since late 1980s, the problem had assumed such acute dimensions that power supply fell short of demand by almost 2000 MW during peak load hours. On a routine basis, this resulted in forced interruptions in the supply of electricity to consumers during peak hours resulting in load shedding. The unreliable power supply shattered the industrial progress. There was a gap between demand and supply due to the rapid increase in electricity demand (estimated to be growing at a rate of 7-8 % per annum at that time). This situation called for immediate intervention by the GOP through adoption of policy measures aimed at massive resource mobilization for investment in the power/energy sector. The enormous quantum of required investment compared with the constrained funding potential of the national exchequer, was not conducive to allocation of scarce GOP funds for power/energy. Therefore, the GOP took a bold initiative in late 80s to induct private sector investment in the power sector.
4. Why was PPIB created as a dedicated institution to handle Private Power Projects?
Developing power generation capacity is very capital intensive. For example the capital requirements for a deficit of 5000 MW is around US$ 6 billion. Such an amount cannot be carved out from the annual budget of federal government. As such in late eighties the Government of Pakistan made in principle decision to seek private sector investment in power generation. Attracting investment of that big magnitude require a team of highly qualified professionals who are trained in project, financial and contract management / analysis beside being courteous and imbued in corporate culture. Long and tedious experimentations by various governmental agencies on part time basis with HUBCO (the first private sector power generation project) and other prospective Independent power Producers (IPPs) in late 1980’s convinced the government to create a dedicated organization having roots in government but having a corporate look that could provide a suitable interface to private sector entrepreneurs, their consultants, lawyers, and lenders feel easy to approach, Private Power and Infrastructure Board(PPIB) was created as a dedicated one window facilitator for attracting private investments in power sector. The resultant success of PPIB was so impressive that PPIB’s model was followed by many other countries. Given the current shortfall and magnitude of investment required, the justification of PPIB as dedicated institute for providing one window facilitation and attract private investment in power sector has magnified manifold.
5. Who are the main lenders?
|National Bank of Pakistan
|Habib Bank Limited
|United Bank Limited
|Muslim Commercial Bank
|US Exim Bank
|Allied Bank Limited
|Askari Bank Limited
|Faysal Bank Limited
|Meezan Bank Limited
|Bank Al Habib
|ANZ Banking Group (Australia)
|Habib Metropolitan Bank Limited
|ABN Amro Bank (Now merged with Faysal Bank)
|The Bank of Punjab
|Soneri Bank Limited
|Bank of Tokyo Mitsubishi
|NIB Bank Limited
|Pak Oman Investment Company
|Pak China Investment Company
|Saudi Pak Industrial and Agricultural Investment Company
|Exim Bank of China
|Industrial & Commercial Bank of China
|China Development Bank
6. Who are the Investors(Sponsors) in Private Power Projects?
|Foreign Investors (Sponsors)
|Local Investors (Sponsors)
|International Power (UK)
|Sapphire Textile Limited
|El Paso (USA)
|Attock Refinery Limited
|TNB – (Malaysia)
|GDF Suez (France)
|Shanghai Electric Group, China
|Power Construction Corporation, China
|China Power International Holding Co, China
|China Gezhouba Group, China
|China Three Gorges, China
7. What is the minimum equity requirement to finance IPPs in Pakistan?
The minimum equity requirement for an IPP in Pakistan is 20% of the total Project Cost.
8. Why IPPs were allowed to do business in Pakistan ?
If projects are implemented through the public sector utilities, they absorb a significant portion of national budget allocation. The allocation for new power projects surpasses the cumulative allocation for health, housing, education and agriculture sectors. Therefore, in order to save governmental allocations for these vital sectors, private sector investment has been sought in Pakistan.
9. Induction of IPPs has resulted in increase in consumer tariff. Is it true?
The Bulk Power Tariff (BPT) offered by Pakistan to the IPPs inducted under the 1994 Power Policy was comparable to the IPP tariffs in other Asian countries. The increase in tariff with time is mainly due to increase in the prices of furnace oil and gas, and devaluation of the Pak Rupee.
10. Who determines the tariff for IPPs?
In order to promote fair competition in the electricity industry and to protect the interests of consumers, producers and sellers of electric power, the GOP has enacted the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997. Under this Act, the National Electric Power Regulatory Authority (NEPRA) has been created to introduce transparent and judicious economic regulation, based on sound commercial principles, to the power sector of Pakistan. One primary responsibility of the regulator is determination of tariff for the various generation, transmission, and distribution companies, including the IPPs. NEPRA follows a standard and transparent procedure for tariff determination, which includes public hearing and views from all stakeholders.
11. What is the main role of PPIB?
Private Power and Infrastructure Board (PPIB) is a “One-Window Facilitator” on behalf of the Government of Pakistan (GoP) to promote private investments in power sector. PPIB approves IPPs, issues LOIs & LOSs (including Tripartite LOSs), approves Feasibility Studies, executes Implementation Agreements (IAs) and provides GoP guarantees.
12. Does PPIB facilitates Power Projects in Private Sector only?
PPIB facilitate Power Project in Private Sector, however, the GOP encourages the establishment of Power Projects in Public-Private partnership in line with the scope of Power Policy 2015.
13. What is the role of the provinces/AJK in development of power projects?
Major role of Provinces/AJK is the facilitation in development of hydropower project, facilitation in acquisition of land, payment of the compensation of land and environmental mitigation, issuance of environmental NOC, provision of security etc. as well as signing of Water Use Agreement and AJK Implementation Agreement in case project is in AJ&K territory.
Provinces/AJK can initiate projects under their own Policy, which can be further processed under Tripartite Letter of Support (TLOS) regime of the Power Generation Policy 2015.
14. Which PPIB Power Policy is in vogue?
Currently, National Electricity Policy 2021 read together with Power Policy 2015.
15. What is IGCEP and its objectives?
IGCEP stands for Indicative Generation Capacity Expansion Plan. The key objective of the IGCEP is to develop a low-cost, 10-year indicative generation expansion plan for the whole country to meet load and energy demand in a reliable and sustainable manner while maximizing the use of indigenous resources for energy security. IGCEP is approved by NEPRA after conducting a formal public hearing and seeking comments from all stakeholders.
16. When IGCEP is updated?
IGCEP is updated annually.
17. What are the main project agreements, and by whom are these signed?
Implementation Agreement (IA) is executed between PPIB on behalf of GoP and the Project Company, Power Purchase Agreement (PPA) is executed between Central Power Purchasing Agency (CPPA-G) and the Company/IPP, Coal/Fuel/Gas Supply Agreement(s) between the Company / IPP and the Coal/Fuel/Gas Supplier(s), and Water Use Agreement is executed between the provincial government and the project company.
18. What is Performance Guarantee?
An unconditional, irrevocable, on-demand bank guarantee provided by the Company in favour of GOP (PPIB) at the time the GOP through the PPIB issues the Letter of Intent (LOI)/Letter of Support (LOS) to the Company, which secures the Company’s obligation to carryout Feasibility Study to be monitored by Panel of Experts (POE) (in case of hydropower projects), approach NEPRA for tariff determination (in case of thermal projects), within a time period specified in LOI and achieve Financial Closing, sign IA with PPIB & PPA with Power Purchaser, in accordance with the terms of the LOI and LOS respectively.
19. What does a government Sovereign Guarantee cover?
The Sovereign Guarantee covers the payment obligations of (every sum of money) that the Power Purchaser and provincial/AJK government are obligated to pay to the IPPs pursuant to the Power Purchase Agreement and Water Use Agreement that the Power Purchaser and provincial /AJK Government gets failed to pay when due in accordance with the terms of their respective agreements. Further, coverage also includes monetary damages arising out of any failure by the Power Purchaser/ provincial/AJK government to perform their obligations under the Power Purchase Agreement, to the extent that any failure to perform such obligations gives rise to monetary damages.
20. What is a Tripartite Letter of Support?
It is actually a Letter of Support executed between three parties/entities (PPIB, Provincial Government and the project company) in order to achieve Financial Closing and other project milestones (including signing of IA and PPA) in developing the project.
21. What kind of technology do power projects use?
For Hydropower projects mainly reaction and impulse turbines are used, whereas for thermal power projects, reciprocating engines, gas turbines, steam turbines, combined cycle with multiple fuels such as Coal, RLNG, gas, RFO, and HSD, are used.
22. Is there any study available on Pump Storage Hydropower Potential?
No. Currently PPIB is planning to conduct and identification of the potential site for pump storage.
23. What is the purpose of Pumped Storage HPPs?
Pumped hydropower storage uses the force of gravity to generate electricity using water that has been previously pumped from a lower source to an upper reservoir. The water is pumped to the higher reservoir at times of low demand and low electricity prices. The purpose of pump storage hydropower is to cater for the intermittency of Variable renewable energy (VRE) projects and effective use of power generation of must run type of power plants like coal and nuclear, to supplement peak demands, to enhance ancillary services for the grid system, and to support policy transformation of the Government of Pakistan from fossil fuel-based power to renewable energy.
24. Is there any Pumped Storage Hydropower Project installed in Pakistan?
25. What does “must run” mean?
The must run is mode of dispatch where off-take of the energy generated by the Power Plant is mandatory upon the Power purchaser (i.e. CPPAG) irrespective of the merit order, provided the plant is available.
26. What do “Take and Pay” or “Take or Pay” mean?
The “Take or Pay” mode of contract in Power Generation Projects obligates the Power Purchase (i.e. CPPAG) to pay the IPPs an amount sufficient to cover fixed costs of establishing the project, reflected as the capacity purchase price in tariff irrespective of taking any electricity dispatch.
While on other hand, under the take-and-pay arrangement, the Power Purchase obligation to pay is contingent upon the dispatch of electricity.
27. Who maintains hydrological data in Pakistan?
Surface Water Hydrology Project of WAPDA.
28. For how many years hydrological data is available in Pakistan?
More than 50 years.
29. How many transmission lines have been developed in the private sector in Pakistan under PPIB?
Matiari- Lahore HVDC Transmission Line of 4000 MW Load Carrying Capability (HVDC ±660 kV), pursuant to Policy Framework for Private Sector Transmission Line Projects 2015
30. What is CTBCM?
CTBCM is a Competitive Wholesale Electricity Market wherein multiple buyers and sellers of electric power can participate by entering into bilateral contracts to purchase and sell electricity at wholesale level.
31. What is the role of PPIB in CTBCM?
CTBCM envisions an Independent Auction Administrator (the IAA), that will facilitate DISCOs in the procurement of power & energy. PPIB will play the role of IAA in CTBCM.
32. What is the estimated hydropower potential in Pakistan, and How much of the total potential has been developed so far ?
Estimated power potential in Pakistan is about 64,000 MW and Projects with installed capacity of 10,852 MW have been developed so far.
33. Where can some one find information on status of hydropower projects in Pakistan ?
Information on the status of hydropower projects can be found in the report “Hydro Power Resources of Pakistan” published by PPIB, available at PPIB web site.
34. Which are the major hydropower plants in Pakistan?
Tarbela (4888 MW), Ghazi-Barotha (1450 MW) Mangla (1000 MW), Neelum Jhelum (969 MW) and Karot (720MW) are the major hydropower plants in operation in Pakistan.
35. Is there any Hydropower IPP in Pakistan?
84 MW New Bong is the 1st Hydro-IPP in Pakistan/AJK. 147 MW Patrind Hydropower Project, 102 MW Gulpur Hydropower Project and 720 MW Karot Hydropower project.
36. What is the model of hydropower project implementation in private sector?
Hydropower Projects in private sector are being implemented on Build- Own-Operate-Transfer (BOOT) basis and the project based on this model shall be transferred to the Government at the end of the concession period.
37. What is the concession period for hydropower projects?
The hydropower projects shall be implemented on BOOT basis or any other mode and the term of term of concession period for the private sector will be 30 years after which the project will be transferred to the Provincial Government/AJK and GB (as the case may be) for Pak Rupee1.
38. What is the average cost of building a hydropower project?
According to the data available on the hydropower projects recently under implementation, the average capital cost for construction is being worked out as 1.5 million to 2 million US $/ MW. This cost is for medium size run of river type hydropower projects, however, the costs of building a hydropower project can vary considerably depending upon nature and location of the project, availability of transmission line and potential environmental mitigation needs.
39. What is the construction period required for development of hydropower project?
Due to the site-specific nature and being on remote locations, construction time required for development of hydropower project is a bit longer as compared with the thermal power projects. For a medium size run of river hydropower project the development and construction time could be around 5 to 6 years.
40. What is the coal resources potential in the country?
Numerous studies have been conducted all of which have concluded that all coal reserves of Pakistan are suitable for power generation. Pakistan’s total coal reserves are 186,007 million tons. The biggest coal reserve of Thar which lies in Sindh has an estimated potential of 175,506 million tons and preliminary studies suggest that Thar is capable of generating 100,000 MW for two centuries.
41. What efforts are being made by PPIB to develop Thar/local coal based projects ?
Inspite of fact that constitutionally coal is a provincial subject, PPIB has endeavored to promote private sector investment in coal based power generation. The Federal Government has announced a set of incentives for coal mining and coal based power projects. Whereas the Government of Sindh (GoS) has created a high power decision making agency i.e. Thar Coal & Energy Board (TCEB) which has high level representation from both the federal and provincial governments. Following Power Generation projects are being developed through PPIB on local coal: 1320 MW Shanghai Electric Power Project at Thar Block-I 660 MW Engro Powergen Project at Thar Block-II 330 MW Thar Energy Limited Power Project at Thar Block-II Sindh 330 MW Thal Nova Thal(Pvt) Limited Power Project at Thar Block-II, Sindh 1320 MW Oracle Coalfield PLC Power Project at Thar Block-VI 660 MW Lucky Electric Power Company Limited at Port Qasim Karachi. 330 MW SiddiqSon Energy Limited at Thar Block-II, Sindh
42. Will there be any role of PPIB in coal based power generation after creation of TCEB?
Yes, PPIB may process private power projects including coal based power projects in the country and will also continue to extend support to all the provincial governments including AJK/GB. Further, the provincial governments may recommend the projects for further processing by PPIB including coal based projects earlier awarded by concerned province as per Power Generation Policy 2015. However, TCEB will be the focal and decision making body for coal affairs of the Thar coal field located in Sindh province.
43. Instead of conventional mining why underground coal gasification projects are not being initiated?
Underground Coal Gasification (UCG) technology is in development stage and a pilot project at Thar block-V based on UCG is being implemented. After ascertaining commercial viability of the pilot project, large scale projects would be considered by relevant government entities.
44. What does Government Guarantee cover?
The Government’s Guarantee covers the payment obligations of the power purchaser under the Energy Purchase Agreement (EPA).
45. What is Implementation Agreement (IA)?
Implementation Agreement (IA) is the agreement signed between the Government of Pakistan through PPIB and the project IPP that provides for direct contractual obligations and undertakings between the Government and the IPP including the Government’s Guarantee.
46. Which is the existing policy for Renewable Energy?
The Policy for Development of Renewable Energy for Power Generation 2019 (RE Policy 2019) is the current policy in place for alternative and renewable energy technologies.
47. What is an upfront tariff?
Upfront Tariff is one which is determined and announced by the Regulator based on its own scrutiny and calculations with certain terms and conditions. The project sponsors may accept the Upfront Tariff based on its viability for the project.
48. What is Cost-Plus Tariff?
Cost-plus tariff is one in which RE IPP is paid its actual cost plus an agreed profit. In this mode, the IPP is required to submit a tariff petition to NEPRA for award of tariff for a particular project along with the tariff proposed for the project and supporting documents evidencing the cost.
49. What are the modes of determination of tariff for an IPP project?
The tariffs for IPP projects are determined by National Electric Power Regulatory Authority (NEPRA). There are three ways for determination of tariff for RE power projects on IPP mode;
- Cost-Plus tariff
- Upfront Tariff
- Competitive Bidding (solicited mode)
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