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2 NATIONAL INSTITUTE OF MANAGEMENT KARACHI

“CHINA-PAK ECONOMIC CORRIDOR (CPEC) - HYDEL, SOLAR & WIND POWER PROJECTS”

SIMULATION EXERCISE-I

PRESENTATION ON SOLUTION PAPER

SPONSOR ADS: MS. SHAGUFTA WARIS DATE: 01-03-2016

3 COMPOSITION OF RAG-IIIS. NO Participants Name Group Assigned Role

1 Safdar Khan OMS CEO, Pakistan Electric and Power

Company (PEPCO) (Leader)

2 Shahid Ali PCS Sindh Board of Investment,

Karachi

3 Laiq Zaman IRS MD Solar Park, Bahawalpur

4 Kashif Rasheed PA &AS Director Alternative Energy

Energy Department

5 Ghulam Mujtaba ISI Ex-

Cadre

D.D Wind Power Project

4SEQUENCE OF PRESENTATION Scope Methodology Introduction Role of PC, WAPDA, PPIB, MoF Hydel Power Projects Solar Power Projects Wind Power Projects Analysis Recommendations Action Plan/ Strategy

5SCOPE OF THE STUDY Economic benefits which Pakistan will get from these

projects. The controversies/issues attached with these projects. The role of Planning Commission, WAPDA, PPIB and

Ministry of Finance (MoF). The reservations of local communities regarding the

acquisition of land. Workable strategy both at short and medium term for

timely completion of the Projects

6METHODOLOGY Primary Method: The team members visited the offices of Sindh

Investment Board held discussion with the following: ( Secretary SBoI Mr. Iftikhar Shalwani) ( Director SBoI Mr. Ibrar Ahmad Sheikh ) Telephonic conversations were also held with Mr. Awais Sumra,

Ex-JS MoF, Mr. Sajjad Haider Sajid (Technical Chief Operations QASPP)

Secondary Method: Official websites of national and international financial organizations were accessed for collection of data. Websites of daily newspapers were also accessed during simulation exercise.

7MEETING WITH DIRECTOR SBoI

8 INTRODUCTION CPEC has four major components

Transport Infrastructure Energy Gwadar Port and Industrial Zones

Energy is one of the most important components. 51 MoUs worth US $ 46 billion stand signed Energy share of total investment is US $ 35 billion Energy shortage is between 5500 MW to 7000 MW*

Source: The Express Tribune , Dated 17 Oct 2015

9Contd… Energy mix of Pakistan is based on combination of Hydro, Thermal

and alternative sources of energy (Energy Policy 2013) CPEC is part of 13th Five Year Plan of China’s 21st Century Silk

Route Initiative. Early Harvest projects are aimed at catering the energy shortage of

Pakistan within 3 to 5 year amounting US $ 28 Billion.* Finances for energy projects are in the shape of loans at interest rate

of 5% to 6%* The investment will be undertaken by private firms to ensure

production of 10,400 MW of electricity

Source :http://www.ipripak.org/wp-content/uploads/2016/01/sfecpii.pdf accessed on 25 Feb 2016

10Major Energy Projects of CPEC 720 MW Karot Hydro Power Project (Punjab) 840 MW Suki Kinari Hydro Power Project (KPK) 100 MW Jhimpir Wind Project (Sindh) 50 MW Sachal Wind Power Project (Sindh) 50 MW Dawood Wind Power Project. (Sindh) 1000 MW Quaid-e-Azam Solar Power Project Bahawalpur China Pakistan Joint Research Centre for Hydro Power

Islamabad

Source: MoU/www.ead.gov.pk accessed on 25-02-2016

11TYPES OF ENERGY PROJECTS

HYDEL POWER PROJECTS

SOLAR POWER PROJECTS

WIND POWER PROJECTS

12ROLE OF PC, WAPDA,PPIB & MoF Role of Planning Commission:  Prepare the plan and review and evaluate its

implementation; Formulate annual plan and ADP. Monitor and evaluate Implementation of projects and programmes;  Facilitate capacity building of agencies involved in

developmentSource: www.pc.gov.pk accessed on 27th February 2016

13Role of PPIB To implement the power policies Award projects to sponsors or private power companies To recommend and facilitate development of power policies To coordinate with the Provincial Governments, local

governments, Azad Jammu & Kashmir To draft, negotiate and enter into security package

documents or agreements and guarantee the contractual obligations of entities under the power policies

To provide investment windowSource: www.ppib.gov.pk accessed on 27th Feb, 2016

14ROLE OF WAPDA Operation and Maintenance of the running Hydel Power

Stations Correspondence with NEPRA regarding proposed

modification for new & upcoming hydel projects Preparation and Submission of Monthly Invoice to

(NTDC) for sale of energy, Processing of procurement cases and finalization of O&M

budget estimates/Foreign Exchange Budgets for Hydel Power Stations.Source: www.wapda.gov.pk accessed on 26th Feb, 2016

15Role of Ministry of Finance  Almost no role in CPEC* Private companies are undertaking the projects.

Source: Telephonic conversation with Awais Manzur Sumra ex-JS MoF on 27 th Feb 2016

16HYDEL POWER PROJECTS

KAROT HPP Run of River project on River Jhelum Located between Punjab and Azad Kashmir near the village of Karot

of Kahuta, Rawalpindi. The project is being built at the cost of US $ 1.65 Billion Financed by Silk Road Fund of China 95.5 meter high dam with 04 turbines for 720 MW generation Estimated Date of Project Completion: December, 2020

Source: www.karotpower.com accessed on 26th Feb 2016

17Contd…..

Gated spill way structure separate from main Dam

Overhead transmission Line of 500 KV which will be constructed by

Government of Pakistan independently

ADVANTAGES:

Limited Water storage

Less Flooding

Less prone to seismic activity

18Contd…..

DISADVANTAGES:

Seasonal because of limited storage

Reduction in River Flow

Bad for fish and marine growth

Affects many habitat

Less useful for agricultureSource: www.karotpower.com accessed on 26th Feb 2016

19Contd…. Suki Kinari Power Project

Located at Kunhar River, Mansehra, KPK

The largest private sector hydro-power initiatives in Pakistan.

Project cost US$ 1.8 billion US

870 MW Power Generation capacity (Run of River Project)

Reservoir’s length is 3.1 Km with 04 Turbines

Estimated Date of Completion: June 2022

Source: www.skhydro.com

20Contd….. Financed by EXIM Bank of China, White Crystals Limited

subsidiary of Al Jomaih, Saudi Arabia is the main sponsor with China Gezhouba Group.

ADVANTAGES: It is a high head scheme and will add in saving in the fuel cost. Predictable multi-year and long-term tariff. Cheaper electricity Environment-friendly project Employment opportunities

Source: www.skhydro.com

21Contd…..

Income Tax Exemption

An underground powerhouse situated 4.1 Km upstream of Paras

Village

Initial studies were initiated in 1960.

Source: www.karotpower.com accessed on 26th Feb 2016

22SOLAR POWER PROJECTSQuaid-e-Azam Solar Power Park Bahawalpur Located in Bahawalpur District of Punjab 200 hectares of desert area in Quaid-e-Azam Wildlife Park Total capacity of the project is 1,000 MW 100MW commissioned in May 2015 by a Chinese Company

Xinjiang Sun Oasis Cost of 100 MW is $131(million). It has installed 400,000 solar panels Expected Date of Completion December 2016Source: http://www.dawn.com/news/1224548

23Contd….ADVANTAGES Environmental friendly and would reduce Pakistan’s carbon

emissions by 90,750 tons every year. Local Job creation up to 33,000

DISADVANTAGES Desert climate is not suitable for the project. High Temp up to 45C-

decreases power production up to 20 % High labor cost for maintenance of 400,000 cells.

Source: http://www.dawn.com/news/1224548

24 ISSUES The 100 MW installed project only produces 18-20 MW instead of

full capacity. Bahawalpur’s climate is not suitable for the project. The temperature

rises above 45 degrees Celsius which does not produce the required amount of electricity

It is constructed on a wildlife park, which has disturbed the bio-diversity of the area

The Govt of Punjab is going to privatize the project to avoid the cost of production and maintenance.

Published in Dawn, April 23rd, 2015

25Contd… High cost per unit of electricity (Rs.22 per unit) Huge operational and maintenance costs. Solar Panel will require cleanliness for which 400,000

liters of water @ 1 liter per panel will be required which will be colossal amount in already arid condition of the desert.

Source: www.sdpi.org. accessed on 27-02-2016

26WIND POWER PROJECTSSACHAL POWER PROJECT Located in Jhimpir, District Thatta 50 MW Production Capacity Stretched on 680 acre of land Estimated Cost around US$ 133 million Contractor is Hydro China Xiebi, Financed by The Industrial and Commercial Bank of China (ICBC) Expected Date of Completion October 2016

Source: http://sedlpk.com. Accessed on 28-02-2016

27Contd…ADVANTAGES Environmental friendly as it generates no waste Barren tract of land and the human settlement is far away No endangered habitats, parks, forests, wildlife, sanctuaries,

historical or cultural resources in the vicinity Job opportunities to the local people.

DISADVANTAGES Noise of installed wind turbine High Risk for migratory birds

Source: http://sedlpk.com. Accessed on 28-02-2016

28Contd…

Sunnec Wind Farm Project Jhimpir located in Jhimpir, Sindh in the Gharo-Keti Bandar wind

corridor.

Generation Capacity is 50 MW

Govt of Sindh has allocated approximately 1,250 acres of land

Estimated Cost around US$ 134 million

Estimated Date of Completion October 2016

29Contd...ADVANTAGES Environmental friendly as it generates no waste Barren tract of land and the human settlement is far away No bad impact on local ecology and nearby historical or cultural

resources Job opportunities for the local people. No impact on groundwater resources.

DISADVANTAGES Noise of installed wind turbine |High risk of collision for migratory birds

30Contd… Hydro China Dawood Power (Pvt) Limited A 50-megawatt wind power project near Near Port Qasim, Bhambore,

Gharo Creek District Thatta, Sindh * Joint venture by Hydro China and Dawood Power Limited Project cost: US $ 130 million* Sindh government has allocated 1,720 acres of land The project is expected to be operational by 30th June 2016 ADVANTAGES Environmental friendly as it generates no waste Barren tract of land and the human settlement is far away

Source-http://www.nepra.org.pk accessed on Feb 26, 2016

31Contd.. No endangered habitats, parks, forests, wildlife,

sanctuaries, historical or cultural resources in the vicinity

Job opportunities to the local people. DISADVANTAGES Noise of installed wind turbine High Risk for migratory birds

32GROUP ANALYSIS CPEC projects (Early Harvest) Best investment opportunity for hydel generation which is cheap and

environment friendly Employment opportunities/ Creation of business activity Relocation of population/ in the light of past experiences Transmission cost to be borne by Government of Pakistan

33Contd… This would further open up avenues for setting up of hydro

power projects on Indus Issues of consensus on CPEC energy projects the role of inter

provincial coordination is not visible The mega hydel power projects like Diamer: Basha hydro

Project, Bunji dam are not covered in early energy harvest projects

Coverage of National Grid of Pakistan is 60% area of Pakistan Mismanagement/Faulty distribution/line losses system cause a

loss of Rs.256 billion to Rs140 billions as per NEPRASource: http://archive.thenews.com.pk/TodaysPrintDetail.aspx?ID=64386&Cat=3&dt=8/24/2011

34RECOMMENDATIONS Timely completion of energy projects/ war footing Redressal of the grievances of the local population and stakeholders Speedy land acquisition be undertaken to avoid price hike factor. Issues surrounding the projects are being resolved through

Provincial Coordination Committees. Transportation of machinery to the project sites should start without

further delay Standardization in procurement of machinery and material be

ensured. Security of foreign labor and technical staff needs to be beefed up.

35Contd…. Timely release of funds by MoF Conflict Resolution Mechanism has been devised Construction of access roads / bridges be started before

initiation of a particular project Formation of a task force for regular monitoring of the

work by PC SWOT analysis of the projects must be carried out

beforehand.

36Contd…

Economic and environmental aspects also be taken into consideration.

Energy crises has hit Pakistani economy hard 2% less GDP, so war footing energy strategy is needed.

Project details are opaque and surrounded in controversies so transparency is essential.

Negotiated Tarrif Rate should be publicized. Provincialization of Grid Stations like India

Source: Governor SBP, Jan, 2016

37ACTION PLAN

SHORT TERM PLAN (1-3 YEARS)S.N ACTIVITY RESPONSIBILITY RESOURCES TIME

PERIODKPI

Financial HR Technical

1. Investment Security/ Financial Incentives

EAD/MoF/CGA/ SBP/PPIB/PDs

FDI Firms Executing Projects

Projects Executing Firms

3YEAR 15% increase in energy sector

2. Stabilization of Pricing Mechanism

NEPRA N/A N/A N/A 1 YEAR All the new investment contracts in renewable sector to be provided with tariff as per agreement.

3. Recovery Measures Provincializing of National Grid and recovery through Provincial authority

N/A Police/Rangers/Dist Management

N/A 1 Year 5-8% increase in recoveries

38MEDIUM TERM PLAN (3-5 YEARS)

S.N ACTIVITY RESPONSIBILITY RESOURCESTIME PERIOD

KPIFinancial HR Technical

1. Electricity generation by Hydel-Wind- Solar

IPPs under CPEC Umbrella/Federal Government

Chinese Government / Govt of Pakistan

Firms Executing Projects/WAPDA

Chinese Govt/WAPDA

3-4YEARS

3,000 MW to be added in system

2. Infrastructure Development

Govt. of Pakistan Chinese Government/Govt. of Pakistan

Govt. of Pakistan/IPPs

Govt of China/Govt of Pakistan/IPPs

4-5 YEARS

Land acquisition /relocation/compensation by Govt of Pakistan

39CONTIGENCY PLAN

1. A brief overview of Pakistan’s execution of mega projects transpires one lesson i.e

never in the history of Pakistan a mega project has been completed in the given

time and resources.

2. As far as discipline in time management is concerned, an expertise-based steering

mechanism will be introduced in Planning Commission to meet the time line.

Monthly and quarterly reviews are part and parcel of it.

3. Secondly in order to ensure smooth financing it is proposed that a revolving fund

may be established by MoF to meet financial emergencies and to continue ongoing

projects.

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