The power sec­tor

The Pak Banker - - 4EDITORIAL - Dr Far­rukh Saleem

MAN­I­FESTO prom­ises: On March 7, 2013, the PML-N came out with a 104-page elec­tion man­i­festo. Here's a brief text anal­y­sis of the man­i­festo. The term 'energy' ap­pears 42 times; the word ' agri­cul­ture' 25 times; the word 're­form' 48 times and the word 'ex­pen­di­ture' 6 times. What that means is that the PML-N made 42 power sec­tor spe­cific prom­ises.

Losses: As per data main­tained by the Pak­istan Elec­tric Power Com­pany (Pepco), losses in 2014 (July-May) stood at 18 per­cent. In 2015 (July-May), losses in­creased to 18.3 per­cent. To be cer­tain, that is not much of an in­crease but the di­rec­tion is neg­a­tive-not pos­i­tive.

Re­cov­ery: As per data main­tained by the Pak­istan Elec­tric Power Com­pany (Pepco), re­cov­ery in 2014 (July-May) stood at 87.8 per­cent. In 2015 (Ju­lyMay), re­cov­ery ac­tu­ally im­proved to 88.6 per­cent. To be cer­tain, that is not much of an im­prove­ment but the di­rec­tion is right.

Cir­cu­lar debt: In 2013, the re­ceiv­able side of cir­cu­lar debt stood at Rs411 bil­lion. Alarm­ingly, the re­ceiv­able side of cir­cu­lar debt in­creased to Rs512 bil­lion the fol­low­ing year and it now stands at a colos­sal Rs627 bil­lion. The payable side of cir­cu­lar debt has also gone up from Rs207 bil­lion in 2013 to a record Rs351 bil­lion as of the last day of May 2015.

In­de­pen­dent Power Pro­duc­ers: As per pub­lished fi­nan­cial state­ments, Hubco, with Hus­sain Da­wood as its chair­man, re­ported a re­turn on eq­uity of 35.7 per­cent. Nishat Power Lim­ited's fi­nan­cial state­ments re­ported a re­turn on eq­uity of 28 per­cent. What that means is that our IPPs are rak­ing in ex­traor­di­nar­ily high prof­its in a busi­ness where re­turns are guar­an­teed by the Gov­ern­ment of Pak­istan. As a con­se­quence, the price of elec­tric­ity is the high­est in the re­gion. In­dus­trial con­sumers in Pak­istan have to pay any­where be­tween Rs16 and Rs21 per kWh whereby in Bangladesh in­dus­trial con­sumers are be­ing charged Rs7.5 to Rs11.5 and in Gu­jarat the rate varies be­tween Rs5.2 and Rs7.7 (all rates have been con­verted to Pak­istani ru­pees).

Will load­shed­ding end by 2018? The odds are that load­shed­ding will get worse. Here's why. Ac­cord­ing to the Pri­vate Power and In­fra­struc­ture Board (PPIB), our in­stalled gen­er­a­tion ca­pac­ity is 23,538MW - and we rou­tinely gen­er­ate about half that much. So, to be cer­tain, load­shed­ding is more of a gov­er­nance is­sue than a ca­pac­ity con­straint.

In the pri­vate sec­tor, a to­tal of nine coal-based power projects are be­ing tossed around. Of the nine, the 6,600MW Pak­istan Pow­erPark, the largest of them all, has al­ready been shelved. As far as oil/gas fired power plants are con­cerned, the Kan­dra Power Pro­ject in Sindh, with 120MW ca­pac­ity, is on but its gas sup­ply is yet to be con­firmed. The 147 MW Pa­trind Hy­dropower Pro­ject is ex­pected to be com­pleted by April 2017.

In the public sec­tor, the Nandipur Ther­mal Power Pro­ject re­mained un­der con­struc­tion for seven long years and had to be shut down af­ter five days of op­er­a­tion. In the public sec­tor, the Neelum-Jhelum Hy­dro­elec­tric Pro­ject has been un­der con­struc­tion for the past seven years and is still not com­plete (the new date of com­ple­tion is end-2016). What that means is that noth­ing sig­nif­i­cant is go­ing to be added by 2018. For the record, Pak­istan is go­ing through two dis­tinct phe­nom­ena which would have a di­rect im­pact on elec­tric­ity's de­mand. One, Pak­istan is go­ing through the fastest pace of ur­ban­i­sa­tion in the whole of South Asia. Two, global warm­ing is bound to in­crease the de­mand for power. By 2020, we are go­ing to need at least 35,000MW.

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