August 21, 2006	Monday	Rajab 25, 1427

TO overcome the deepening power crisis, the government is planning to increase stable electric supply to Karachi and the rest of the country. One wishes that these actions were taken a couple of years ago.

A short-term plan is to be implemented by June 2007, mid-term plan by 2008-09 and a long-term plan by 2011-15. Other immediate measures include such as allowing Wapda to set up fast-track thermal power plants, releasing huge funds for on-going power transmission and distribution projects, expediting completion of under-construction hydro power projects and extending financial support to the KESC.

But will these measures be adapted earnestly, effectively and timely to bring in significant improvement in the power system within foreseeable future? Only time will tell.

There is, undoubtedly, a dire need to focus on implementing the short-term plan with elections scheduled for 2007. By that time, there would be power shortage of 1,300 MW.

In a recent move, Wapda, which hitherto had capped its thermal power generation capacity, has been allowed to establish new thermal power plants. Thus, Northern Power Generation Co Ltd., a company of WAPDA, has embarked upon installing a 400-500 MW capacity plant at Chichoki Mallian, District Sheikhupura, for which international tender for design, supply and installation has been issued. In addition, three combined cycle power plants of cumulative capacity of around 600 MW, based on reciprocating (diesel) engine technology will be installed.

Using natural gas and residual fuel oil (RFO) as primary fuels, these power plants, each of 200 MW capacity, are being established at Chichoki Mallian (District Sheikhupura), Nandipur (District Gujranwala) and Faisalabad. Feasibility studies of these projects were conducted by Wapda, selecting the site locations near load centres aiming at minimising the current huge line losses.

These projects are scheduled to be operational by June 2007. Is the time-frame achievable? It becomes questionable if Wapda has to follow, and apparently it would, its routine procedure of issuing international tenders and stringent procurement rules, which makes decision-making a lengthy and time-consuming process. Then, the procurement of plant machinery is desired on the basis of suppliers’ credit that may not attract good response to tenders, as it is no more buyers’ market globally.

A look at the international market shows that the equipment manufacturers/suppliers have made a cartel dictating their own terms for payment, price and delivery. Lately, Wapda has experienced that the suppliers’ credit was not being offered by any source other than China, say, for its hydro power projects.

So far, all the IPP thermal power projects coming up under Power Policy 2002 have incorporated General Electric (GE) gas turbines or Wartsila diesel engines, depending on the technology selected.

Though there are other reputed manufacturers of gas turbines too, like Siemens, Alstom and Mitsubishi, and of diesel engines like Caterpillar and MAN, it seems they all have left Pakistan market open to their competitors, as they have never offered equipment to the new IPPs. Now, Siemens is reported to be active for the supplies to be made for the forthcoming projects of KESC to which it is already a technical partner.

One observes with dismay that the human resources of WAPDA and its capacity and capability have depleted as a result of its on-going corporatisation and privatisation process, its thermal division having suffered most. Its top technical personnel have retired, having provided any replacement. Senior engineers have left Wapda due to uncertain future and despondency, having joined the new IPPs on hefty salary packages. There has been no induction of engineers since long, and it is only recently that fresh engineers are being employed, but on contract basis that does not promise career to them.

Thus, there may be serious reservations about project management capability of Northern Power Generation Co to strictly meet the schedules. Here, one is reminded that used four gas turbines of total capacity of 320 MW, which were gifted by the UAE government sometime in August 2004, have not yet been dismantled and transported to Pakistan by Wapda. One turbine of 80 MW capacity is to be installed at Shahdara (Lahore), while the other three of cumulative capacity of 240 MW are destined for Korangi (Karachi).

Also, Wapda would soon award contract for a 150-MW rental power facility to be located at its Piranghaib (Multan) Power Plant. Tender for the same has recently been advertised. Simultaneously, Wapda is at present negotiating with GE, USA to provide another rental facility consisting of 6x25 MW gas turbines to be located near Lahore.

The rented gas-fuelled power plants, to operate on ‘Base Load’ conditions, will be available for an initial period of two years, with the option to extend further to another two or three years.

The plants may be operational within five to six months according to international practices, in case arrangements for gas supply and power dispersal could be done by Wapda, in parallel. But will the power purchased be affordable? It is learnt, GE will charge three million dollars per month as fixed charges for the facility.

On the transmission and distribution side, action has been initiated by Wapda to import power transformers, circuit breakers and other equipment for various switchyards and grid stations. Additional auto transformers for 500/220 kV and 220/132 kV transmission are being procured for Tarbela and Mangla power stations costing millions of dollars. New grid stations in various regions are to be constructed.

Up-gradation of National Power Control Centre (NPCC) is on cards, which is to be financed under ODA loan. The project will also include installation of state-of-the-art supervisor control and data acquisition (SCADA) and energy management system (EMS).

Likewise, KESC will develop additional power generation capacity to the level of 600 MW on fast-track basis. Potential projects include extension of Korangi Thermal Power Station by 480 MW capacity, to be implemented in phases. First phase of 120 MW capacity is expected to be operational by April 2007, whereas the whole project will be completed by July 2007. The time estimates are too ambitious, to say the least, and can only be achievable if second-hand equipment is installed.

Perhaps, a barge-mounted power project is more reliable a solution under the circumstances, which needs due consideration by KESC, to meet immediate power shortage in Karachi. Revamping, modernisation and expansion of its transmission and distribution system is being undertaken by KESC simultaneously.

The government will be well advised to focus on timely implementation of projects under the revised short-term plan, particularly the IPP projects, and not to disturb medium-term and long-term plans at this stage. It may be recalled that Power Policy 2002, with the scope covering both private and public sectors, had drawn generation expansion plan consisting of short, medium and long- term periods, with indicative commissioning date for each project.

The plans were further updated subsequently when Wapda launched Hydropower Development Plan—Vision 2025. It was only recently that the government approved National Energy Security Plan that provides periodic break-up of additional power generation capacity to be created at national level until 2015. What is then the sanctity, or reliability, of such a plan if it needs to be revised within a year of its launching?

In fact, the short-term plan had priority on developing hydroelectric power projects. Wapda had envisaged installing three hydel power projects, at Allai Khwar, Khan Khwar and Duber Khwar in the NWFP, with a cumulative capacity of 323 MW, which were to be operational by June 2006. Likewise, Gomal project of 130 MW and Raised Mangla project of 180 MW capacity were scheduled to go on stream by December 2006. All these projects, currently under construction, have been delayed for completion by almost two years.

In private sector, power projects at Mangla (New Bong Escape, 79 MW), Rajdhani (132 MW) and Gulpur (60MW), all to be located in Azad Jammu and Kashmir, were scheduled to go into operation by the year 2007.

None of the projects however has achieved any physical progress so far, though the first two projects were sanctioned under 1995 Hydro Policy. The case of New Bong Escape project is cited here, for which the sponsors signed power purchase agreement with the government in April 2004, but the project could not attain financial close as yet. Shockingly, even the project consultants have not been appointed.

Interestingly, the framework of 2002 Power Policy has mandated the Private Power Infrastructure Board (PPIB) “to oversee implementation of the Policy” covering both private and public sector projects, through a committee headed by federal secretary, water and power. The board of directors chaired by the federal minister now assumes this role, though Wapda on-going projects have never been discussed at this forum.

Progress for development of all the private sector projects is regularly monitored at the PPIB and corrective measures adopted by the board. In case, there are long delays in project implementation, the investors somehow manage to avoid any punitive action against them, otherwise liable in accordance with the provisions of the policy, using their political connections.

Power Policy 2002, with recent amendments, is in place and provides for an effective mechanism for monitoring the progress of power sector projects. The problem lies with the attitude of the investors who have been exploiting the situation and are responsible, some directly and others indirectly, for creating prevailing power crisis.

Both— domestic as well as international investors— are resourceful and have access to the Presidency and PM Secretariat to influence government decisions on tariffs and incentives.

Still, many of them have not started physical work on the respective projects that otherwise have achieved advanced processing status. Their demands are never-ending it seems. There are many examples to quote, if at all there is such a need.

On the demand of investors to save time, Nepra had to prescribe an up-front tariff for thermal power plants based on primary energy sources of gas and oil, besides carrying out negotiations for tariff in other cases. A number of amendments were made by the ECC of the Cabinet, September 2005 onward, extending additional fiscal and financial benefits to the prospective investors. This too did not yield positive results.

In a desperate move therefore, Prime Minister Shaukat Aziz approved on December 2, 2005 processing of fast-track projects of 540 MW cumulative capacity by leading Pakistani business-houses, such as Shirazi Group, Mansha Group, which were to be commissioned by June 2008. The government allowed curtailing project processing procedures and a tariff with built-in incentives in capacity purchase price for the proposed projects.

Likewise, the government had asked in January this year all the existing Independent Power Producers (IPPs) to bid for creating by June 30, 2008 an aggregate capacity expansion of up to 775 MW. Though seven IPPs, including KAPCO, AES, HUBCO, Japan Power and Kohinoor Energy, indicated their interest in the proposal, only one of them has taken concrete steps. KAPCO plan to set up a new plant of 400 MW but that too not before the year 2009.

To complicate the matters, a number of these IPPs, at present operating their installed power plants on RFO, insisted on obtaining long-term supply of natural gas instead, knowing well that it was not currently available.

None of the fast-track power projects is therefore in the processing pipeline. The demand is for an average levelised tariff in the range of, say, for oil-fuel based plant, cents 12.85 per kWh (on gas turbine technology) to cents 12.45 per kWh (on diesel engine technology), compared to available up-front tariff of cents 10.35 and cents 7.23 per kWh, respectively, which is considered already on higher side as fuel cost remains a pass-through item.

Nonetheless, the plan to augment power generation capacity through the private sector is being pursued vigorously by the PPIB. Additional 5,000 MW electricity is to be generated in the private sector within a period of four to five years. Five thermal power plants namely Orient Power of 225 MW capacity at Balloki, Sapphire Power of 200 MW capacity at Muridke, Star Thermal of 123 MW at Jarwar Sindh, Saif Power of 200 MW at Sahiwal and Attock Gen of 150 MW at Morgah would commence operations by end June 2008.

In addition, a number of hydroelectric power plants of cumulative capacity of 5,724 MW are scheduled for operations by 2010-2015 and a series of coal-based projects of 1,550 MW capacity are scheduled to come on stream in 2012.

Timely completion of these projects is of prime importance.