WB sets terms for funding projects: Hydrological risks, riparian rights
By Khaleeq Kiani
ISLAMABAD, Oct 5: The World Bank has linked private sector investment in the development of Pakistan’s hydropower sector to an immediate settlement of institutional, regulatory and commercial issues such as riparian rights and hydrological risks.
The bank made the observation in an aide memoire finalized in consultation with the Pakistan government as part of a power sector investment programme which is currently in the process of finalization. A World Bank team is currently in Islamabad to push things forward.
According to the document, about 80 per cent of the country’s economically viable hydropower potential has not yet been developed. The World Bank has cited the paucity of relevant information, prioritization problems and multi-user nature of water reservoirs and required pricing as impediments in the way of public and private investment in this sector.
The settlement of some issues between the World Bank and the Pakistan government and implementation of a number of related milestones would lead to finalization of the size of the loan programme by January 2006, followed by loan negotiations in May 2006 and final loan approval by July 2006.
The two parties have agreed that electricity demand in Pakistan is increasing fast and already straining the available generation capacity, especially in the periods of low hydropower availability and peak demand.
The National Transmission and Dispatch Company (NTDC) has been assigned the responsibility of least cost generation investment planning.
The World Bank says that although quite a few power stations have been identified, it appears that the number of pre-feasibility and feasibility studies is relatively small and reliable data is sparse on hydropower projects offered for World Bank investment.
There may also be some methodological problems with generation planning, such as the apparent exclusion of costs of the associated investments in the transmission system. “The portfolio of projects with completed feasibility studies, which could be offered for private or public financing, is rather thin, which is an impediment for investment”, the bank said.
For example, it said, the private power and infrastructure board is currently promoting seven hydropower projects without feasibility studies.
Wapda is also implementing several projects, but only three feasibility studies have been completed for new project sites, such as the 106-mw Golan Gol, 4,500-MW Bhasha dam and 969-MW Neelum-Jhelum.
In addition to the need for better evaluation of project sites offered for investment and their prioritization, there is a host of other issues specific to hydropower projects, such as geological and hydrological risks, water riparian rights, environmental and social issues, multi-user nature of water reservoirs, pricing of hydropower and project financing.
These issues make investment in hydropower particularly challenging. “It is not clear whether these issues have been analyzed and debated in sufficient detail to provide a basis for determining the government’s policies and to define an attractive institutional, regulatory and commercial environment for hydropower investment, especially from the private sector.”
It has also reached the conclusion that investments in loss reduction and efficiency improvements would fall over a period of time but not eliminate the need for additional generation capacity. Therefore Pakistan, in conjunction with efforts to improve the efficiency of the existing system, needs to mobilize investments in generation and the accompanying transmission infrastructure, it said.
The ministry of water and power has now requested the World Bank to help identify technical assistance for hydropower development in the country to address these and other issues and develop a coherent strategy for private and public investment in hydropower to serve as a basis for developing bankable project proposals.
