THREE GOLDEN INVESTMENT OPPORTUNITIES IN PAKISTAN POWER SECTOR

ZAFAR ALI KHAN MANAGING DIRECTOR

PRIVATE POWER & INFRASTRUCTURE BOARD

(MINISTRY OF WATER AND POWER)
20TH FEB 2005

Contents
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Why Invest in Pakistan Power Sector? Power Demand & Firm Supply Position The Three ICB Projects - Location and Salient Features The Project Rationale, Economics and Contractual Structure A Synopsis of the Process Next Steps

Why Invest in Pakistan Power Sector

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Rapidly growing economy: 6 - 8% anticipated GDP growth over the next three years Strategic importance: Power availability is a key to achieving growth targets Growing Demand: Additional 5,500 MW required by 2010 Investment required: Additional US$ 4-5 Billion in the next 5 years for power generation alone Investment climate: Significant improvement over last few years Economic environment: Improved credit rating and higher foreign exchange reserves
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Why Invest in Pakistan Power Sector (contd..)

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Strong commitment of the Government for Private Sector Investments Policy and procedures: Simplified for attracting new investments (Power Policy 2002) Regulatory and legal issues: Full support of the Regulator for ICB Projects Process: Transparent and competitive One-window facility: Credible track record and experienced professionals Major international energy companies already present in Pakistan

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Power Demand & Firm Supply Position

20500 19500 Firm Supply (MW) Demand (MW)
19080 20584

E lectricity (megawatts)

18500 17500 16500 15500 14500

14642 16548 15483 15046 14336 15082
411 MW 1,457 MW

17689

SURPLUS

4,025 MW 2,634 MW

S H O R T A G E S

5,529 MW

15072

15091

15055

15055

15055

13500 12500 2003

13071

13831

2004

2005

2006

2007

2008

2009

2010

Year
As envisaged in the Policy
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Location of the Three Projects

450 MW Faisalabad

400-500 MW Uch-II at Guddu

GUDDU

350-400 MW Lahore

Salient Features of 400-500 MW UCH-II Project

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Location: Technology: Proposed Fuel: Gas Requirement: Gas Supplier: Cooling Water: Site Access: Power Purchaser: Interconnection:

Near existing thermal power station, Guddu Combined Cycle Low Btu gas (450 Btu/scf) from Uch Field 160-180 MMCFD Oil & Gas Development Corporation Limited Canal / Tube wells By road and rail NTDC / HESCO Tapping of Guddu Multan 500 kV line
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Plant Configuration: 2 Gas Turbines + 1 Steam Turbine

Salient Features of 450 MW Faisalabad Project

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Location: Technology: Proposed Fuel: Gas Requirement: Gas Supplier: Cooling Water: Site Access: Power Purchaser: Interconnection:

Near existing WAPDA plant at Faisalabad Combined Cycle Dual Fuel (Pipeline Quality Gas / RFO) 80 - 100 MMCFD Sui Northern Gas Pipeline Limited (SNGPL) Canal / Tube wells By road and rail NTDC/FESCO 220 kV & 132 kV double circuit trans. lines
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Plant Configuration: 2 Gas Turbines + 1 Steam Turbine

Salient Features of 350-400 MW Lahore Project

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Location: Technology: Proposed Fuel: Gas Requirement: Gas Supplier: Cooling Water: Site Access: Power Purchaser: Interconnection:

Near Lahore Combined Cycle Dual Fuel (Pipeline Quality Gas / RFO) 70 MMCFD SNGPL Canal / Underground water By road and rail NTDC/LESCO NTDCs system near Lahore
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Plant Configuration: 2 Gas Turbines + 1 Steam Turbine

Note: Feasibility study under preparation.

Projects Rationale
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Strong electricity demand based on present consumption and projected growth rates Generation Capacity has marginally increased in the last 5 years Feasibility studies confirm projects economics (under preparation for Lahore project) Proximity to existing and available infrastructure Gas projects are environment-friendly

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Projects Economics
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Good return on investment level will be driven by competition Fixed long-term tariff approved by the Regulator Two-part tariff (energy & capacity) to meet fixed costs Project company cash flow is not subject to foreign exchange fluctuation and local inflation risk Project base case uses gas as fuel thus improving overall tariff Increase in fuel price is a pass-through in the tariff Shareholders and lenders are provided certainty of cash flows if the project company performs efficiently Main sponsor can divest equity after six years
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Projects Contractual Structure

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Developed to international standards Balanced risk profile for investors, lenders and government agencies

Performance obligations of the power purchaser and fuel supplier are backstopped by the Government

Government will provide protection against specified political risk and changes in taxes and duties regime

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Projects Contractual Structure (contd..)

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Government will ensure convertibility of Pak Rupee & remittability of foreign exchange for necessary project-related payments Governing Law will be that of a neutral country International Arbitration will be allowed Bidders and managing sponsor will be responsible for EPC and O&M arrangements Bidders will be responsible for arranging financing and achieving financial close

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The Process
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Bidder or their consortium will be pre-qualified based on financial strength and industry experience

A bidding consortium would be required to have a main or managing sponsor

Projects will be developed sequentially in the interest of investors and lenders appetite

Each project will be tendered on a competitive basis

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The Process (contd..)

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RFP will provide technical details, bid evaluation criteria and draft Project contracts

Tentative Schedule of activities for the projects is provided in the Preliminary Information Memorandum

PPIB will administer the process on behalf of GOP PPIB has successfully implemented existing IPPs of 5,577 MW capacity

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Next Steps
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Invitation of EOI by PPIB and pre-qualification of bidders Issuance of RFP to pre-qualified bidders Submission of bids by the pre-qualified bidders Evaluation of bids by PPIB and approval by NEPRA Notification of successful bidder Execution of LOS and Project contracts Financial Close

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We Welcome Private Investors to Join Hands with Us

to Invest in Pakistans Power Sector for Mutual Business Benefit