three golden investment opportunities in pakistans power sector zafar ali khan.pdf

7/28/2019 Three Golden Investment Opportunities in Pakistans Power Sector Zafar Ali Khan.pdf

1/17

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


2/17

2

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


3/17

3

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


4/17

4

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


5/17

5

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


6/17

6

Location of the Three ProjectsLocation of the Three Projects

450 MW Faisalabad

350-400 MW Lahore

400-500 MW Uch-II at Guddu

GUDDU


7/17

7

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


8/17

8

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

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 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


9/17

9

Salient Features of 350Salient Features of 350--400 MW Lahore400 MW Lahore

ProjectProjectzz Location:Location: Near LahoreNear Lahore


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 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.


10/17

10

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


11/17

11

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


12/17

12

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


13/17

13

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


14/17

14

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


15/17

15

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


16/17

16

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


17/17

We Welcome Private Investors

to Join Hands with Us

to Invest in Pakistans Power Sector

for Mutual Business Benefit

three golden investment opportunities in pakistans power sector zafar ali khan.pdf

Documents