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THREE GOLDEN INVESTMENTTHREE GOLDEN INVESTMENTOPPORTUNITIES INOPPORTUNITIES IN
PAKISTAN POWER SECTORPAKISTAN POWER SECTOR
ZAFAR ALI KHANZAFAR ALI KHAN
MANAGING DIRECTORMANAGING DIRECTOR
PRIVATE POWER & INFRASTRUCTURE BOARDPRIVATE POWER & INFRASTRUCTURE BOARD
(MINISTRY OF WATER AND POWER)(MINISTRY OF WATER AND POWER)
2020THTH FEB 2005FEB 2005
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ContentsContents
zz Why Invest in Pakistan Power Sector?Why Invest in Pakistan Power Sector?
zz
Power Demand & Firm Supply PositionPower Demand & Firm Supply Position
zz The Three ICB ProjectsThe Three ICB Projects -- Location and Salient FeaturesLocation and Salient Features
zz The Project Rationale, Economics and Contractual StructureThe Project Rationale, Economics and Contractual Structure
zz A Synopsis of the ProcessA Synopsis of the Process
zz Next StepsNext Steps
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Why Invest in Pakistan Power SectorWhy Invest in Pakistan Power Sector
zz Rapidly growing economy: 6Rapidly growing economy: 6 -- 8% anticipated GDP growth over8% anticipated GDP growth over
the next three yearsthe next three years
zz Strategic importance: Power availability is a key to achievingStrategic importance: Power availability is a key to achievinggrowth targetsgrowth targets
zz Growing Demand: Additional 5,500 MW required by 2010Growing Demand: Additional 5,500 MW required by 2010
zz Investment required: Additional US$ 4Investment required: Additional US$ 4--5 Billion in the next 5 years5 Billion in the next 5 years
for power generation alonefor power generation alone
zz Investment climate: Significant improvement over last few yearsInvestment climate: Significant improvement over last few years
zz Economic environment: Improved credit rating and higher foreignEconomic environment: Improved credit rating and higher foreign
exchange reservesexchange reserves
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Why Invest in Pakistan Power SectorWhy Invest in Pakistan Power Sector (contd..)(contd..)
zz Strong commitment of the Government for Private SectorStrong commitment of the Government for Private Sector
InvestmentsInvestments
zz
Policy and procedures: Simplified for attracting new investmentsPolicy and procedures: Simplified for attracting new investments(Power Policy 2002)(Power Policy 2002)
zz Regulatory and legal issues: Full support of the Regulator for IRegulatory and legal issues: Full support of the Regulator for ICBCB
ProjectsProjects
zz Process: Transparent and competitiveProcess: Transparent and competitive
zz OneOne--window facility: Credible track record and experiencedwindow facility: Credible track record and experienced
professionalsprofessionals
zz Major international energy companies already present in PakistanMajor international energy companies already present in Pakistan
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Power Demand & Firm Supply PositionPower Demand & Firm Supply Position
15072 15091 15055 15055 15055
15046
14336
15082
13831
20584
19080
17689
16548
15483
14642
1307112500
13500
14500
15500
16500
17500
18500
19500
20500
2003 2004 2005 2006 2007 2008 2009 2010
Year
Electricity
(megawatts)
Firm Supply (MW)Demand (MW)
411 MW
5,529
MW
4,025
MW
2,634 MW
1,457 MW
SURPLUS
SS
HH
OO
RR
TT
AA
GG
EESS
As envisaged in the PolicyAs envisaged in the Policy
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Location of the Three ProjectsLocation of the Three Projects
450 MW Faisalabad
350-400 MW Lahore
400-500 MW Uch-II at Guddu
GUDDU
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Salient Features of 400Salient Features of 400--500 MW UCH500 MW UCH--IIIIProjectProject
zz Location:Location: Near existing thermal power station, GudduNear existing thermal power station, Guddu
zz Technology:Technology: Combined CycleCombined Cycle
zz
Plant Configuration:Plant Configuration: 2 Gas Turbines + 1 Steam Turbine2 Gas Turbines + 1 Steam Turbinezz Proposed Fuel:Proposed Fuel: Low Btu gas (450 Btu/scf) from Uch FieldLow Btu gas (450 Btu/scf) from Uch Field
zz Gas Requirement:Gas Requirement: 160160--180 MMCFD180 MMCFD
zz Gas Supplier:Gas Supplier: Oil & Gas Development Corporation LimitedOil & Gas Development Corporation Limited
zz Cooling Water:Cooling Water: Canal / Tube wellsCanal / Tube wells
zz Site Access:Site Access: By road and railBy road and rail
zz Power Purchaser:Power Purchaser: NTDC / HESCONTDC / HESCO
zz Interconnection:Interconnection: Tapping of GudduTapping of Guddu Multan 500 kV lineMultan 500 kV line
l f l b d
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Salient Features of 450 MW FaisalabadSalient Features of 450 MW Faisalabad
ProjectProjectzz Location:Location: Near existing WAPDA plant at FaisalabadNear existing WAPDA plant at Faisalabad
zz Technology:Technology: Combined CycleCombined Cycle
zz
Plant Configuration:Plant Configuration: 2 Gas Turbines + 1 Steam Turbine2 Gas Turbines + 1 Steam Turbinezz Proposed Fuel:Proposed Fuel: Dual Fuel (Pipeline Quality Gas / RFO)Dual Fuel (Pipeline Quality Gas / RFO)
zz Gas Requirement:Gas Requirement: 8080 -- 100 MMCFD100 MMCFD
zz Gas Supplier:Gas Supplier: Sui Northern Gas Pipeline Limited (SNGPL)Sui Northern Gas Pipeline Limited (SNGPL)
zz Cooling Water:Cooling Water: Canal / Tube wellsCanal / Tube wells
zz Site Access:Site Access: By road and railBy road and rail
zz Power Purchaser:Power Purchaser: NTDC/FESCONTDC/FESCO
zz Interconnection:Interconnection: 220 kV & 132 kV double circuit trans. lines220 kV & 132 kV double circuit trans. lines
l fS li f hh
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Salient Features of 350Salient Features of 350--400 MW Lahore400 MW Lahore
ProjectProjectzz Location:Location: Near LahoreNear Lahore
zz Technology:Technology: Combined CycleCombined Cycle
zz
Plant Configuration:Plant Configuration: 2 Gas Turbines + 1 Steam Turbine2 Gas Turbines + 1 Steam Turbinezz Proposed Fuel:Proposed Fuel: Dual Fuel (Pipeline Quality Gas / RFO)Dual Fuel (Pipeline Quality Gas / RFO)
zz Gas Requirement:Gas Requirement: 70 MMCFD70 MMCFD
zz Gas Supplier:Gas Supplier: SNGPLSNGPL
zz Cooling Water:Cooling Water: Canal / Underground waterCanal / Underground water
zz Site Access:Site Access: By road and railBy road and rail
zz Power Purchaser:Power Purchaser: NTDC/LESCONTDC/LESCO
zz Interconnection:Interconnection: NTDCs system near LahoreNTDCs system near Lahore
Note: Feasibility study under preparation.Note: Feasibility study under preparation.
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Projects RationaleProjects Rationale
zz Strong electricity demand based on present consumption andStrong electricity demand based on present consumption and
projected growth ratesprojected growth rates
zz Generation Capacity has marginally increased in the last 5 yearsGeneration Capacity has marginally increased in the last 5 years
zz Feasibility studies confirm projects economics (under preparatiFeasibility studies confirm projects economics (under preparationon
for Lahore project)for Lahore project)
zz Proximity to existing and available infrastructureProximity to existing and available infrastructure
zz Gas projects are environmentGas projects are environment--friendlyfriendly
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Projects EconomicsProjects Economics
zz Good return on investmentGood return on investment level will be driven by competitionlevel will be driven by competition
zz Fixed longFixed long--term tariffterm tariff approved by the Regulatorapproved by the Regulator
zz TwoTwo--part tariff (energy & capacity) to meet fixed costspart tariff (energy & capacity) to meet fixed costs
zz Project company cash flow is not subject to foreign exchangeProject company cash flow is not subject to foreign exchange
fluctuation and local inflation riskfluctuation and local inflation risk
zz Project base case uses gas as fuel thus improving overall tariffProject base case uses gas as fuel thus improving overall tariff
zz Increase in fuel price is a passIncrease in fuel price is a pass--through in the tariffthrough in the tariff
zz Shareholders and lenders are provided certainty of cash flows ifShareholders and lenders are provided certainty of cash flows ifthe project company performs efficientlythe project company performs efficiently
zz Main sponsor can divest equity after six yearsMain sponsor can divest equity after six years
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Projects Contractual StructureProjects Contractual Structure
zz Developed to international standardsDeveloped to international standards
zz
Balanced risk profile for investors, lenders and governmentBalanced risk profile for investors, lenders and governmentagenciesagencies
zz
Performance obligations of the power purchaser and fuel supplierPerformance obligations of the power purchaser and fuel supplierare backstopped by the Governmentare backstopped by the Government
zz
Government will provide protection against specified political rGovernment will provide protection against specified political r
iskisk
and changes in taxes and duties regimeand changes in taxes and duties regime
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Projects Contractual StructureProjects Contractual Structure (contd..)(contd..)
zz Government will ensure convertibility of Pak Rupee & remittabiliGovernment will ensure convertibility of Pak Rupee & remittabilityty
of foreign exchange for necessary projectof foreign exchange for necessary project--related paymentsrelated payments
zz Governing Law will be that of a neutral countryGoverning Law will be that of a neutral country
zz International Arbitration will be allowedInternational Arbitration will be allowed
zz Bidders and managing sponsor will be responsible for EPC andBidders and managing sponsor will be responsible for EPC and
O&M arrangementsO&M arrangements
zz Bidders will be responsible for arranging financing and achievinBidders will be responsible for arranging financing and achievingg
financial closefinancial close
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The ProcessThe Process
zz Bidder or their consortium will be preBidder or their consortium will be pre--qualified based on financialqualified based on financial
strength and industry experiencestrength and industry experience
zz A bidding consortium would be required to have a main orA bidding consortium would be required to have a main or
managing sponsormanaging sponsor
zz Projects will be developed sequentially in the interest of invesProjects will be developed sequentially in the interest of investorstors
and lenders appetiteand lenders appetite
zz Each project will be tendered on a competitive basisEach project will be tendered on a competitive basis
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The ProcessThe Process (contd..)(contd..)
zz RFP will provide technical details, bid evaluation criteria andRFP will provide technical details, bid evaluation criteria and draftdraft
Project contractsProject contracts
zz Tentative Schedule of activities for the projects is provided inTentative Schedule of activities for the projects is provided in thethe
Preliminary Information MemorandumPreliminary Information Memorandum
zz PPIB will administer the process on behalf of GOPPPIB will administer the process on behalf of GOP PPIB hasPPIB has
successfully implemented existing IPPs of 5,577 MW capacitysuccessfully implemented existing IPPs of 5,577 MW capacity
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Next StepsNext Steps
zz Invitation of EOI by PPIB and preInvitation of EOI by PPIB and pre--qualification of biddersqualification of bidders
zz Issuance of RFP to preIssuance of RFP to pre--qualified biddersqualified bidders
zz Submission of bids by the preSubmission of bids by the pre--qualified biddersqualified bidders
zz
Evaluation of bids by PPIB and approval by NEPRAEvaluation of bids by PPIB and approval by NEPRA
zz Notification of successful bidderNotification of successful bidder
zz Execution of LOS and Project contractsExecution of LOS and Project contracts
zz Financial CloseFinancial Close
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We Welcome Private Investors
to Join Hands with Us
to Invest in Pakistans Power Sector
for Mutual Business Benefit