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POWER SECTOR – UPDATE
September 2013
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business & Financial Risk
Outlook on the Sector
p
Supply Chain – Largely a single buyer modelPower Sector - Supply Chain
Transmission Distribution Consumption
F Oil FESCO
Generation
Power Sector Supply Chain
Furnance Oil FESCO
Gas GEPCO DomesticCoal HESCO
Independent Power Plants, Generations Companies, and Thermal
CPPA
Coal HESCO
Nuclear IESCO Industrial
Water LESCONational
Transmission and Distribution Company
KESC
Dams
Solar MEPCO Commercial
Wind PESCOHydel IPPs QESCO Others
Distribution Company
Independent Power Plants
Renewable
yde s Q SCO Ot e sTESCO
KESC KESC
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business & Financial Risk
Outlook on the Sector
Mix
Power | Installed Capacity and Power Mix
%Jun-12 Jun-13 %
IPPs 8,560 8,560 36%
Generation Capacity (MWH) InstalledMix
GENCOs 4,720 4,720 20%KESC 2,381 2,381 10%Others (CPPs/SPPs) 324 324 1%RPPs 50 - 0%
Thermal 68%
WAPDA 6,587 6,612 28%IPPs 129 213 1%
Nuclear Two Nuclear plants 787 787 3% 3%Wind IPPs 50 0% 0%
Hydel29%
Wind IPPs - 50 0% 0%Import Mainly from Iran - - 0% 0%
Total 23,538 23,647 100% 100%FY09 FY10 FY11 FY12 FY13
Generation (GWh) 96 647 99 766 100 582 98 664 102 989Generation (GWh) 96,647 99,766 100,582 98,664 102,989 Growth (%) -0.7% 3.2% 0.8% -1.9% 4.4%
Generation(MWh) 11,033 11,389 11,482 11,263 11,757 Capacity Factor (Utilization) 54% 53% 49% 48% 50%
We only use half of what we have
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
S G ti % C t (%) C t (PKR) /U it
Power | Generation Cost & Cost Ranking
Source Generation% Cost (%) Cost (PKR) /UnitRPPs 0% 0.0% - WAPDA 28% 0.3% 0.07 Wind\ IPPs 0% 0.0% 0.46 Hydel IPPs 1% 0.1% 0.86 T N l l t 4% 0 6% 1 22Two Nuclear plants 4% 0.6% 1.22 KESC 14% 8.7% 4.30 Others (CPPs/SPPs) 1% 1.7% 9.79 ( )Mainly from Iran 0% 0.5% 9.85 IPPs 39% 66.5% 12.11 GENCO 12% 21 6% 12 23 GENCOs remain mostGENCOs 12% 21.6% 12.23 Avg Cost (PKR) / Unit 100% 100% 7.08
GENCOs remain most inefficient even with gas
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Power | Fuel Mix and Cost Per Unit
Source Generation% Cost (%) Cost (PKR) /UnitHydel 34% 0.4% 0.09 Wind 0% 0 0% 0 45Wind 0% 0.0% 0.45 Nuclear 4% 0.7% 1.22 Coal 0% 0.0% 4.41 Gas 23% 15 7% 5 06Gas 23% 15.7% 5.06 Import 0% 0.5% 9.75 Mixed 1% 1.7% 9.99 RFO 35% 76 8% 16 48RFO 35% 76.8% 16.48 HSD 1% 4.1% 21.12 Gross NTDC 100% 100.0% 7.54
Based on Energy Procurement Reports by CPPA for 12 months FY13by CPPA for 12 months FY13
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Power | Distribution Efficiency
R R i (%)
Allowed Actual Delta (%)FESCO 10 83 10 91 (0 08)
PKR 234bln comesout as loss to GoP
DISCO FY11 FY12LESCO 98.10 96.13 GEPCO 98.84 98.46 FESCO 99 76 98 45
Recovery Ratio (%)T&D Losses (%)
FESCO 10.83 10.91 (0.08) IESCO 9.00 9.52 (0.52) GEPCO 10.50 11.24 (0.74) LESCO 12 00 13 51 (1 51)
based on FY13 pricesand latest available
on T&D losses
FESCO 99.76 98.45 IESCO 93.38 95.85 MEPCO 97.97 97.25 Punjab 97.72 97.03 HESCO 59.10 69.12LESCO 12.00 13.51 (1.51)
QESCO 18.00 20.87 (2.87) MEPCO 15.00 17.94 (2.94) HESCO 22 00 27 73 (5 73)
on T&D losses
PKR 57bln comes out asloss to GoP based on
HESCO 59.10 69.12 SEPCO - 50.88 KESC 85.60 88.70 Sindh 81.08 86.41 PESCO 82.22 82.48 HESCO 22.00 27.73 (5.73)
PESCO 28.00 35.97 (7.97) KESC 21.00 29.70 (8.70) SEPCO 28 00 39 51 (11 51)
loss to GoP based onFY13 prices and latestavailable Recovery Ratio
TESCO 66.33 6.32 KPK 78.39 67.90 QESCO 40.99 36.15 Baluchistan 40.99 36.15 Co ntr 89 83 86 00SEPCO 28.00 39.51 (11.51) Country 89.83 86.00
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Power | Consumption
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Peak Demand Supply Shortfall (MW)
Key Targets of National Power Policy
1 U = 1000 0 4500-5000
Peak Demand Supply Shortfall (MW)
1U =2 2 9.99 12
Average Commercial Cost (PKR /KwH)
By 2017, GoP, under1U 2 2 9.99 12
T&D L (%)
National power Policy,aspires this situation
1U = 5 0 < 16 22
T&D Loss (%) aspires this situation
1U = 10% 50 87 95
Collection ratio (%)
Scale in Unit Target Level Current Level
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Supply StrategyDemand Management
S Affordable Power Strategy
Strategies| National Power Policy
Supply Strategy
• New Economic model (targeting subsidy to poor only, supply of expensive but dedicated electricity to CPPs/
Strategy
• Improve Technology Standards (Ban imports of non-efficient consumer electronics in Pakistan,
Affordable Power Strategy
• Move towards Cheaper Fuels (Identification and conversion of expensive RFO/HSD plants to gas or coaldedicated electricity to CPPs/
Generator users, subsidy phasing out in 3 years)
• Bring Existing Capacity online (Immediate retirement of circular debt, Maximum
electronics in Pakistan, Provide Pakistani manufacturers 3 years time to bring products at par with the efficiency)
• Time of Use (ToU) tariffs
to gas or coal• Gas conservation for Power
(Increase gas price except for poor residents, reduction in gas utilization in CNG and UFGof circular debt, Maximum
payables days limit - - RFO : 45-60 days/ Gas 30-45 days, financing to idle plants
• Complete Pipeline Projects (prioritization to projects that
( )(Impose specific timing and restriction for public places -shopping and recreational activities , commercial lightening e.c) and I d i f T U
• - - 10% gas diversion can generate 2,000MW , divert gas and ensure firm supply to power plants)
(p p jcan be brought online in 2-3 years especially coal, run of the run, and bio-mass
• Assign key project manager from MoWP to each pipeline
Introduction of ToU meters for peak and off-peak prices
• Pricing as per new economic model (targeting subsidy to poor only, supply of
i b t d di t dproject expensive but dedicated electricity to CPPs/ Generator users, subsidy phasing out in 3 years)
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
G ti St t T i i St t
Strategies| National Power Policy
Supply -Chain Strategy
• Reduction in allocation of Fuel to GENCOs until higher efficiency
Generation Strategy
• Provide fuel to Efficient plants (Heat rate testing, prioritize and
Transmission Strategy
• Optimize Transmission (Sign performance contracts with NTDC -u g e e c e cy
is achieved, Divert fuel to more efficient IPPs -- 4,000mtoe diversion can save PKR 75bln/annum PKR
g, pallocate fuel based on efficiency, make allocation and efficiency level transparent online
-2.5% allowed losses vs3.6% actual, Dispatch based on economic order, Use of technology with75bln/annum - - PKR
13bln/M on GENCOs produces 650MW vsPKR 10bln/M to IPPs produces 1,150MW
transparent online, continuous monitoring of efficiency of plants)
• Privatization of GENCOs ( Either
technology with experience HR)
• Redesigning/Redefing National Grid (New plants to be built closer
• Stringent monitoring and policy fro GENCOs (performance contracts, fuel procurement contracts measurement
privatize or lease GENCOs through O&M contracts, Pilot 2 GENCOs immediately, prepare other GENCO
to load centres, redesign merit order, Expand HVT lines)
• Incentivize private sector (New businesscontracts, measurement
of quantity and quality of fuel etc.)
prepare other GENCO for privatization
sector (New business model based upon whole sale transactions, exchanges and wheeling charges)
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Di t ib ti St tFinancial Efficieny Governance Strategy
Strategies| National Power Policy
Distribution Strategy
• Performance Contracts (Short Term): Sign Performance contracts
i h k k h ld
yStrategy
• Collect Receivables (Automatic Adjustment of amounts owed by
i & d
Governance Strategy
• Reform & Coordinate Planning: Official Coordination Council b/w M W&P M P M F dwith key stakeholders
including CEOs of DISCOs, Coverage of Perfromace contracts: reduction in Dist losses
provinces & govt. depts from NFC award and department budget to be done by independent adjuster in 3-6 Ms,
d f
MoW&P, MoP, MoF, and PC plus representatives of provinces , GB and AJK
• Reforms for structural and regulatory aspects of
(Technical and Theft), full collection of DISCOs receivables using
• Smart metering and Feeder level accounting
transparent procedure for future billing/collection, GST refund collection from FBR with appropriate mechanism to
id f b ild )
NEPRA & OGRA• Restructuring of MoW&P
(Power sector reforms -PEPCO, CPPA, NTDC)
g(Short Term): Smart meters installation to be complated in next 2 months - 65% complete)
• Privatization of DISCIOs -
avoid future buildups)• Punish defaulter and
elimiate Theft (Eliminate T&D theft, focus loadsheddimg in low Privatization of DISCIOs
- Privatize few firts, dev elop P&L of DISCOs at feeder level, privatize all over a period
gcollection areas, dis-connections after 60 days overdue, Reconnections with pre-paid card based meters))
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Strategies | National Power Policy
Short term
B i i ti
Medium term
F l
Long term > 5yrs
C l t L• Bring existing capacity online
• Stop pilferage• Rationalize
• Focus on low cost pipeline
• PPP projects in coal and hydro
• Complete Large infrastructure hydro projects
• Retire High• Rationalize tariff
• Sign performance
coal and hydro Retire High cost energy Contracts
pcontracts
• Transparency through website
Responsibility | NPP implementation | Council of Common Interests (CCI)
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Country Sales Mix 1
Eff ti 16 05 12 Eff ti 05 08 13 ICategorywise Weighted Average GoP Notified Tariff 2
Power | How much we pay?
Effective 16.05.12 Effective 05.08.13 IncreaseConsumer CategoryResidential 46.9% 7.61 7.61 - Industrial 32.2% 9.26 13.04 41%
PKR per Unit
% %Agriculture 7.9% 8.61 10.50 22%Commercial 6.9% 11.71 15.76 35%Bulk Supply 3.5% 9.21 13.71 49%AJK 2.4% 6.33 12.49 97%Public Lighting 0.3% 0.04 0.04 - Residential Colonies attached to Industries 0.0% 0.00 0.00 - Electricity Charge (EC) per Unit (PKR) 100% 8 51 10 46 23%Electricity Charge (EC) per Unit (PKR) 100% 8.51 10.46 23%Increase in EC per Unit (PKR) 1.95
Simple Average Increase 49%Weighted Average Increase 40%
5 consumer categories
2 Weighted average for each category is calculated as sales % in each sub-category multiplied by respective tariff as notified by GoP
1 Based on weighted average sales mix of 6 DISCOS (LESCO, FESCO, MEPCO, PESCO, IESCO, and GEPCO : ~75% of sanctioned load) as reported in Form-27 of regulatory accounts/ Annual Petition filed by each DISCO for FY14
g g
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business & Financial Risk
Outlook on the Sector
Power | How much we will pay?Country Sales Mix 1 Categorywise Weighted Average GoP Notified Tariff 2
Effective 16.05.12 Effective 05.08.13 IncreaseConsumer CategoryResidential 3 (Effective 01.10.13) 46.9% 7.61 9.89 30%I d t i l 32 2% 9 26 13 04 41%
PKR per Unit
Industrial 32.2% 9.26 13.04 41%Agriculture 7.9% 8.61 10.50 22%Commercial 6.9% 11.71 15.76 35%Bulk Supply 3.5% 9.21 13.71 49%AJK 2.4% 6.33 12.49 97%Public Lighting 0.3% 0.04 0.04 - Residential Colonies attached to Industries 0.0% 0.00 0.00 - Electricity Charge (EC) per Unit (PKR) 8 51 11 53 36%Electricity Charge (EC) per Unit (PKR) 8.51 11.53 36%Increase in EC per Unit (PKR) 3.02
Simple Average Increase 46%Weighted Average Increase 35%
6 consumer categories
2 W i ht d f h t i l l t d l % i h b t lti li d b ti t iff tifi d b G P
1 Based on weighted average sales mix of 6 DISCOS (LESCO, FESCO, MEPCO, PESCO, IESCO, and GEPCO : ~75% of sanctioned load) as reported in Form-27 of regulatory accounts/ Annual Petition filed by each DISCO for FY14
Weighted average for each category is calculated as sales % in each sub-category multiplied by respective tariff as notified by GoP
3 GoP's commitment to IMF as part of 36 Months Extended finance facility under Energy Sector Reforms ( IMF would be monitoring the implementation under Technical Memorandum of Understanding ). In other words it is inevitable!
Power | How much it costs?Assumptions TotalSold Actual 2012 (mln Units) 7,537 8,580 6,178 14,467 10,049 8,528 55,339 Share % 14% 16% 11% 26% 18% 15%FY13 IESCO FESCO GEPCO LESCO MEPCO PESCOFY13 IESCO FESCO GEPCO LESCO MEPCO PESCODISCO's Tariff charged 10.51 11.29 13.06 11.69 13.30 13.62 Weighted averageEnergy Cost (7.54) (7.54) (7.54) (7.54) (7.54) (7.54) 7.54
2.97 3.74 5.52 4.14 5.76 6.08 Weighted Average
0.40 0.58 0.62 1.08 1.05 0.94 4.660.40 0.58 0.62 1.08 1.05 0.94 4.66 Cost to GoP 12.2 12.2 12.2 Consumer Price 8.51 10.46 11.53Subsidy 3.70 1.75 0.68 No. of Units 81,361 81,361 81,361
Subsidy 301 142 55
As per Budget FY14 349 220
NJS (8,136) GST (110,762)
As per Budget FY14 349 220
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Net Subsidy (118,549)
Financial Risk [Inter-corporate debt & Subsidy]
I C Ch i f DEBTS
Payable to DISCOs , KESC Low RecoveriesL
Inter-Corporate Chain of DEBTS
End Consumer
LossesReceivable from Consumers Subsidy
Payable to NTDC
Receivable from DISCOs KESC
DISCOs, KESC
Receivable from DISCOs, KESCPayable to IPPs, GENCOs
Receivable from NTDCPayable to Fuel Suppliers
NTDC , KESC
IPPs , GENCOsPayable to Fuel Suppliers
Receivable from IPPs, GENCOs, KESCPayable to E&P Companies
Fuel Suppliers
Receivable from Fuel SuppliersE&P Companies
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
PKR bln
Gross Transaction Amount 503 Liquidated Damages (23)
Circular Debt Settlement
And the dust settlesLiquidated Damages (23)
Total (Excluding LDs) 480
Gross Cash Transaction 342Dividend received (20)
dust settles…..
Total Net Cash Settlement 1 322 Non- Cash Transaction2 138
Circular Debt Settlement PKR bln
Cash IPPs 161PIB OGDCL 56 PKR bln
Circular Debt Settlement
PIB PPL 23PSO 81
Cash 33PIB 48
Non-Cash Settlement WHE 90NTDC 10Gencos 15PIB 48
322
Gencos 15Nuclear Plants 23Total Non-Cash 138
T l (N f LD d Di id d)1 Effective 28.06.122 Total (Net of LDs and Dividend) 4802 Effective 21.07.13
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Business Risk | Assessment
1. Demand Supply Gap [Supply in Deficit]2. Sector Lifecycle [Growth]3. Sector Competitiveness [Low Buyer Power ; Low Supplier Power]p y pp4. Sector Significance to suppliers [High]
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business Risk –Power Sector &Financial
Risk
Outlook on the Sector
Business Risk | Key Performance Indicators
1. Generation Efficiencyi i i ib i l2. Transmission & Distribution losses
3. Recovery of bills/receivables
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Financial Risk [Key Performance Indicators]
1. Working Capital Management [agreement to1. Working Capital Management [agreement to Increase the payable days of NTDC]
2. Debt Repayment Behavior3 T&D L3. T&D Losses4. Achieving targets as per agreement under IMF
programprogram5. Implementation of National power Policy
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
What’s the outlook | Stable [ from Negative]
Business Risk:Generation Segment: low to Medium.Transmission and Distribution Segment: mediumTransmission and Distribution Segment: medium.
Financial Risk:Generation, Transmission and Distribution Segment: medium
Power – Supply Chain Performance National Power
PolicyCost vs Price –Settlement of Circular Debt
Business &Financial
RiskOutlook on the
Sector
Bibliography
1. National Power Policy 2013: http://www.mowp.gov.pk/2. Memorandum on Economic and Financial Policies for 2013/14-2015/16 :
http://www.finance.gov.pk/MEFP_201314_201516.pdf3. Technical Memorandum of Understanding: http://www.finance.gov.pk/tmu.pdf
National Electric Power Regulatory Authority (NEPRA) : www.nepra.org.pk4. Petitions filed by IESCO , PESCO, LESCO, GEPCO, FESCO, MEPCO :
k/T iff/P i i /DISCO / h // k/ww.nepra.org.pk/Tariff/Petitions/DISCOs/ : http://www.nepra.org.pk/5. Decision of the Authority (NEPRA) in the matter of Fuel Charges Adjustment for 12 months (Jul12 –Jun13)
: http://www.nepra.org.pk/6. Water and Power Regulatory Authority (WAPDA) : www.wapda.gov.pk7 P ki El i P C (PEPCO) k7. Pakistan Electric Power Company (PEPCO): www.pepco.gov.pk8. National Transmission and Despatch Company (NTDC) : www.ntdc.com.pk9. State of Industry Report 2011-2012 : http://www.nepra.org.pk/industryreports.htm10. Private Power and Infrastructure Board (PPIB) : www.ppib.gov.pk
Note : All year wise Electricity Statistics of Pakistan relate to Fiscal Year (which starts from Jul and ends in Jun)
Analysts Rana Muhammad Nadeemd @
Samiya Mukhtari @
Naureen Hyath t@
Humza HussainH h i @nadeem@pacra.com samiya@pacra.com naureen.hyat@pacra.com Humza.hussain@pacra.com
Contact number: +92 42 3586 9504
DISCLAIMERSCPACRA has used due care in preparation of this document. Our information has been obtainedfrom sources we consider to be reliable but its accuracy or completeness is not guaranteed.The information in this document may be copied or otherwise reproduced, in whole or in part,
id d th i d l k l d d Th t ti h ld t b li dprovided the source is duly acknowledged. The presentation should not be relied upon asprofessional advice.
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