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POWER SECTOR –AN OVERVIEW

October 2012

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Why Power?

1. Manufacturing companies need it to operate plant


and machines
2. Service companies need it to operate technology
3. Agriculture needs it for tube wells
4. Domestic Consumers need it for a Hassle free
life

™ If all of the above are getting the required power,


economy can proceedd with ith other
th basic
b i & developmental
d l t l
activities in the country.

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Power Sector | Significance & Evolution

Electricity & Gas Distribution (Sectoral Share in GDP )


4.5
4.0
35
3.5
3.0
2.5
2.0
%
1.5
10
1.0
0.5
-
FY00 FY05 FY09 FY10 FY11 FY12
Electricity & Gas
3.9 3.2 2.5 2.8 2.2 2.18
Distribution

• Declining trend in share of utilities


(reduction in supply of energy) in GDP.
• Significant impact on GDP
• The cost of supply deficit/reduction to the
economy is ~PKR380bn (~2% of GDP)
[Economic Survey of Pakistan].

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Supply Chain – Largely a single buyer model

Power Sector - Supply Chain

Generation Transmission Distribution Consumption

Furnance Oil FESCO


Independent Power
Thermal Gas Plants, Generations GEPCO Domestic
Coal Companies, and HESCO
KESC
National IESCO Industrial
Hydel Water Dams Transmission and LESCO
Distribution
i ib i Company
Solar MEPCO Commercial
Renewable Independent Power
Wind PESCO
Plants
Hydel IPPs QESCO Others
TESCO
KESC KESC

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Supply Chain – Key Participants in Pakistan

™WAPDA, IPPs, RPPs, and GENCOs – sell


electricity to the central power purchasing
agency (CPPA) – National Transmission and
D
Despatch
t h Company
C

™ KESC is the only vertically integrated


company in Pakistan. It has its own generation
plants and to meet the demand of its coverage
area – mainly Karachi, KESC buys electricity
from NTDC NTDC, through CPPA, transmits
the electricity to distribution companies
(
(DISCOs). )

™DISCOs – Peshawar, Islamabad, Lahore,


Multan, Quetta, Hyderabad, Gujranwala, and
Sarhad Electric Supply companies. Electricity
is then sold to final customer.

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Regulatory Framework

The Regulator: National Electric Power Regulatory Authority [NEPRA]:

1. Issues Licenses for generation, transmission and distribution of electric


power

2. Establishes and enforces Standards to ensure quality and safety of


operation
i and d supply
l off electric
l i power to consumers

3. Approves investment and power acquisition programs of the utility


companies

4. Determines Tariffs for generation, transmission and distribution of


electric power.
power

Power – World Power


Business Risk –
Significance & Sector – Demand Outlook on the
Supply Chain Power Sector Financial Risk
Evolution of & Supply Sector
[Pakistan]
sector in Pakistan Dynamics
Power of World in the World of Power

1990 : 11,822 TWh 2010 : 20,629 TWh

37% 15% 11% 41% 21% 5%

17% 18% <1% 13% 16% 2%

<1% <1% 1% <1% <1% 1%

ƒ Increased reliance on coal and gas


g
ƒ Increased focus on solar and wind
ƒ decreased reliance on hydel and oil

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Power of World in the World of Power
El t i it demand
Electricity d d in
i the
th world
ld | P
Projections
j ti
30,000
26,503 TWh

25,000

20,000
TWh

15,000
Expected Generation Mix
10,000 2020
5,000
Fuel / Growth Low High
Coal 36.6 19.6
0 Gas 20.5 20.5
2010 2020 Oil 24
2.4 13
1.3
Low growth scenario
Nuclear 14.5 18.4
Hydro 16.8 18.7
Wind 5.2 11.0
Solar 12
1.2 45
4.5
Geothermal 0.5 1.0
Other 2.2 5.1
Total TWh 26,503 30,392

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Power of World in the World of Power

2008 2009 2010 2011 2012


Generation (TWH) 18 960
18,960 19 020
19,020 19 250
19,250 19 120
19,120 20 250
20,250
World [TWH] Consumption (TWH) 16,880 17,480 17,930 17,780 19,090
Per Capita consumption (KWH) 2,517 2,574 2,649 2,566 2,719
Losses -11% -8% -7% -7% -6%
2011
Generation (GWH) 102,484
Pakistan Consumption (GWH) 76,285
Per Capita consumption (KWH) 431
Losses -26%

™Pakistan s per capita consumption is ~6x


™Pakistan’s 6x lower than world
average

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Electricity Generation in Pakistan
Comparison of Installed Capacity and Generation of Electricity
2012 25,000 125,000
Generation Capacity (MWH)
Installed % of total
20,000 100,000
GENCOs 4,885 20.7%

Capacity in MWH

Units in Miillions
KESC 2,050 8.7% 15,000 75,000
Thermal IPPs 8,587 36.3%
10,000 50,000
RPPs 453 1.9%
Others (CPPs/SPPs) 324 1.4% 5,000 25,000
WAPDA 6,444 27.3%
Hydel IPPs 111 0.5% - -
2008 2009 2010 2011 2012
Nuclear Two Nuclear plants 787 3.3% Installed Capacity 20,232 20,556 21,614 23,412 23,641
Generation 11,125 10,806 11,399 11,699 11,158
Import Mainly from Iran - 0.0%
Units Generated during the year 97,451 94,663 99,856 102,484 97,745
Total 23,641 100%
Electricity Generation by sector players (including Imports)
Source wise electricity generation during FY12 during FY12
Import Others
Nuclea r Import (Ira n) Mixed 1.7%
0.8% 0.3%
4.9% 0.3% Wind
0.0% GENCOs
13.5%

WAPDA KESC
Hydel 30.7% 8.6%
Ga s 31.9%
26.2%

Coa l
0.1%
RFO HSD IPPs
34.1% 1.6% 45%

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Electricity Consumption in Pakistan

Segment wise Electricity Consumption


Public Light Bulk Supply
Others
0 6%
0.6% 4 6%
4.6%
1.6%

Agriculture
11.8%

Commercial Domestic
7.5% 46.2%

Industrial
27.7%

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Demand – Supply Gap [Going forward]
Power Generation Projects in Pipeline

No Capacity Expected Cost Per MW


Public Sector US$
Hydel 12 2,358 96,282 40.8
Private Sector
Oil Based 8 997 1,151 1.2
Pipeline Quality Gas 1 140 140 10
1.0
Dedicated Gas fields 3 621 780 1.3
Hydel 16 5,271 10,096 1.9
Coal 7 1,725 2,356 1.4
Naphta 2 404 404 10
1.0
37 9,158 111,209 12.1
Deficit in Demand & Supply (MWh)
FY13 FY14 FY15
Planned Generation Capability 21,746 24,212 25,081
Projected Demand Growth Rate 8% 7% 7%
Projected Demand Growth Rate 25,284 27,092 29,032
Deficit (3,538) (2,880) (3,951)

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Business Risk | Assessment

1. Demand Supply Gap [Supply in Deficit]


2. Sector Lifecycle [Growth]
3. Sector Competitiveness
p [Low Buyery Power ; Low Supplier
pp Power]
4. Sector Significance to suppliers [High]

Power Deficit in Pakistan


30,000 30% Consumption Consumption % of total Electricity Consumption of
25,000 25%
20,000 20% 2011 of country of Power Sector country generated (MWH) Fuel per MW of
15,000 15%
10,000 10% consumption Electrcity
WH
MW

5 000
5,000 5%
- 0% High Speed Diesal (tonnes) 6,700,436 99,847 1% 358,466 18.69
(5,000) -5%
(10,000) -10% Furnance Oil (tonnes) 8,921,327 8,038,924 90% 35,846,642 0.249
2008 2009 2010 2011
Generation Capability 14,707 16,040 15,144 15,430 Natural and Low BTU Gas 1,240,671 366,906 30% 29,118,000 0.043
Demand during Peak
19,281 20,314 21,029 21,086
(mln cubic feet)
Hours
Deficit (4,574) (4,274) (5,885) (5,656)
Coal (Tonnes) 7717149 96,488 1% 131,000 58.91
Deficit % Max Demand 24% 21% 28% 27% Oil, Gas, Coal (TOE) 50,162,164 15,082,791 30% 65,454,108 0.230

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Business Risk | Key Performance Indicators

1. Generation Efficiency
2. Transmission
i i & Distribution
i ib i losses
l
3. Recovery of bills/receivables
Amount Lost Billed Realized
2011 Units Purchased Units Sold/Billed Dist Losses Recovery Ratio
(PKR mln) (PKR mln) (PKR mln)
PESCO 13396 8,712 -35% (37,133) 69,065 54,146 78.4%
IESCO 8502 7,674 -10% (7,231) 67,015 62,580 93.4%
GEPCO 7314 6,439 -12% (7,625) 56,111 55,459 98.8%
LESCO 16995 14,741 -13% (21,178) 138,501 135,872 98.1%
FESCO 9685 8,596 -11% (9,411) 74,289 74,111 99.8%
MEPCO 12471 10,189 -18% (18,956) 84,637 82,922 98.0%
HESCO 8784 5 814
5,814 -34%
34% (27 229)
(27,229) 53 302
53,302 31 501
31,501 59 1%
59.1%
QESCO 5084 4,048 -20% (7,998) 31,250 12,810 41.0%
KESC 15433 10,072 -35% (56,961) 107,016 91,559 85.6%
97,664 76,285 -22% (188,211) 681,186 600,960 88.2%

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Financial Risk [Inter-corporate debt & Subsidy]
I t C
Inter-Corporate
t Ch
Chain
i off DEBTS

End Consumer
Payable to DISCOs , KESC Low Recoveries
Losses
Receivable from Consumers Subsidy
DISCOs, KESC
Payable to NTDC

Receivable from DISCOs, KESC


NTDC , KESC
Payable to IPPs, GENCOs

Receivable from NTDC


IPPs , GENCOs
Payable to Fuel Suppliers

Receivable from IPPs, GENCOs, KESC


Fuel Suppliers
Payable to E&P Companies

Receivable from Fuel Suppliers


E&P Companies

2006-07
2006 07 2007-08
2007 08 2008-09
2008 09 2009-2010
2009 2010 2010-2011
2010 2011
Tariff Determined by NEPRA (Rs./kwh) 4.73 5.77 8.63 8.63 8.95
Tariff Notified by GOP (Rs./kwh) 4.43 4.74 5.52 5.57 7.33
Subsidy Rs./kWh) 0.30 1.02 3.11 3.06 1.62

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Financial Risk [Key Performance Indicators]

1. Working Capital Management


2. Debt Repayment Behavior
3. T&D Losses

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
What’s the outlook | NEGATIVE

Business Risk:
Generation Segment: low.
Transmission and Distribution Segment: medium.
medium

Financial Risk:
Generation, Transmission and Distribution Segment:
medium to high

Power – World Power


Significance & Sector – Demand Business Risk – Outlook on the
Supply Chain Financial Risk
Evolution of & Supply Power Sector Sector
sector in Pakistan Dynamics
Bibliography
1. Pakistan Economic Survey 2011-12: Chapter 1 | Growth and Stabilization | Table 1.5: Sectoral Share
in Gross Domestic Product (GDP)
2. Pakistan Economic Survey 2011-12: Chapter 14 | Energy
3. National Electric Power Regulatory Authority (NEPRA) : www.nepra.org.pk
4. Water and Power Regulatory Authority (WAPDA) : www.wapda.gov.pk
5. Pakistan Electric Power Company (PEPCO): www.pepco.gov.pk
6. National Transmission and Despatch Company (NTDC) : www.ntdc.com.pk
7. State of Industry Report 2010-2011 : http://www.nepra.org.pk/industryreports.htm
9. Wärtsilä Corporation : http://www.wartsila.com
10. Private Power and Infrastructure Board (PPIB) : www.ppib.gov.pk
11. Pakistan Economic Survey y 2011-12: Chapter
p 12 | Population
p Labour Force and Employment
p y | Table
12.1: Selected Demographic Indicators
12. Central Intelligence Agency | World Fact Book | https://www.cia.gov/library/publications/the-world-
factbook/
13. Pakistan Energy Year Book : 2010-2011
14. Note : All year wise Electricity Statistics of Pakistan relate to Fiscal Year (which starts from Jul and
ends in Jun)
Analysts Rana Muhammad Nadeem Samiya Mukhtar Naureen Hyat Arslan Rafique
nadeem@pacra.com
d @ samiya@pacra.com
i @ naureen.hyat@pacra.com
h t@ arslan.rafique@pacra.com
l fi @

Contact number: +92 42 3586 9504

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SC
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d l acknowledged.
k l d d The
Th presentation
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b relied
li d upon as
professional advice.