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Opportunities in Punjab – Hydro
Opportunities in Punjab
Punjab with population of 93 million is the largest province of Pakistan and contributes 60 % of the GDP. It has a large industrial base with more than 48,000 units. There is a growing un-met demand of energy which offers an opportunity for investments in power generation projects based on various indigenous sources:
Hydro
Coal
Biomass, Biogas and Waste to Energy
Solar

Policy and Institutional Framework:
Punjab Power Generation Policy – Government of Punjab has developed and an enabling power policy to facilitate investment in this vital sector. Punjab Power Policy 2009 provides a framework for the development of power plants in both public and private sector as well for joint venture projects. The policy is intended to promote all types of technologies including hydel, coal, solar, wind and bio-mass. Hydel projects in the private sector would be implemented on Build-Own-Operate-Transfer (BOOT) basis while other projects in the private sector can be established on either BOOT basis or on Build-Own-Operate (BOO) basis.

Incentives: Power generation companies are allowed to import plants and equipment @ 5% duty (0 % for renewable energy) with exemption on sales tax. Other incentives include: income tax exemption for life; full repatriation of profit plus investment; international arbitration awards enforceable under law; hydrological risk borne by the government; minimum 15% ROE guaranteed net of taxes (US$ based).

Punjab Power Development Company Limited – The Government of Punjab has established Punjab Power Development Company (PPDCL), a government owned company registered with the Security Exchange Commission of Pakistan (SECP), to develop power projects in public sector as well as in public-private partnership mode.

Punjab Power Development Board – The Punjab Power Development Board (PPDB) has been established as “One Window Facilitator” to promote and encourage private sector’s participation in the power sector.

Key Statistics
• Punjab derives its name from the five rivers flowing through the province (Sutlej, Beas, Ravi, Chenab and Jhelum). Punjab is home to over 90 million people. Location: 27. 40°/to 34.01° N and 69.20°/ to 75.20° E. latitude & longitude
• The installed electricity generation capacity is approximately 21000 MW, presently out of which 6599 MW comes from hydropower. The identified hydropower potential in the country is approximately 41,722 MW
• Punjab consumes 68% of generated national power. The annual demand growth is 6-8%.We are facing power shortfall ranging from 3000 to 5000 MW. The current energy mix is 33% hydro power and 67% thermal
• Punjab has the world’s largest contiguous irrigation canal network, 23712 miles long
• Punjab Government invites the private sector to invest in power stations at raw sites on canals and rivers. There is an identified Hydropower potential of 600 MW on canal falls/rivers
• The five rivers of the Punjab and Indus Basin yield averagely 145 MAF yearly. The hydrological risks are minimum

Solicited Hydro power sites in Punjab:

Fiscal and Financial Incentives
• Mandatory purchase of power generated by IPPs
• The Power Purchase will ensure grid connection, off take voltage and interface
• Wheeling arrangements
• Bonus incentive on power production more than the bench mark level
• NEPRA (National Electric Power Regulatory Authority) is in a process of announcing FIT (Feed in Tariff) for small hydropower projects soon
• 17% Rate of return on Equity assured for Hydropower projects
• Hydropower projects can be implemented on Build-Own-Operate-Transfer (BOOT) basis or on other negotiable mechanism
• GOP will guarantee the terms of executed agreements including payment terms
• No custom duty or sales tax for machinery, equipment and spares
• Exemption on income tax including turnover rate tax and withholding tax on import
• Repatriation of equity along with dividends freely allowed
• Non-Muslims and non-residents exempted from payment of zakat on dividend paid by the company
• Power generation companies can issue corporate registered bonds and shares at discounted prices
• Foreign banks can underwrite shares and bonds issued by private power companies
• Non-residents can purchase securities issued by Pakistani companies
• Abolition of 5% limit on investment of equity in associated undertakings
• Independent rating agencies are operating in Pakistan to facilitate investors in making informed decisions
• Government of Pakistan will guarantee the terms of executed agreements including payment terms
• Sovereign Guarantee by the Federal Government

Punjab Power Generation Policy 2006
• Projects may be developed on Raw/Solicited sites
• Concessions in duties/tax regime announced by Government of Pakistan are applicable for projects developed under the policy
• Standard formats of Power Purchase Agreement (PPA), Implementation Agreement (IA) and Water Usage Agreement (WUA) are available
• Water use charges @ Rs.0.15 per unit (Kwh) are payable on the actual energy generated
• Dispersal of power can be made by:
– Sale to dedicated industry
– Sale to local area by establishing distribution network
– Sale to utility company (NTDC/DISCO),
• Use of Government land is allowed in follwoing two modes:
– Lease
– Through equal equity participation.
• Mode of investment for Hydropower Power is:
– Build
– Own
– Operate;
– and Transfer basis (BOOT) or PPP
Un-solicited Proposals (Raw Sites)
• The proposals for which feasibility studies are not available can be developed for
• power generation and are classified as un-solicited proposal/raw sites
• The process includes invitation of Expression of Interest through press, registration and pre-qualification. The highest ranking sponsor is selected, who is issued Letter of Interest (LOI) authorized to carry out feasibility studies within 12 months
• Tariff will be negotiated between sponsor and power purchaser and approved by
• NEPRA Letter of Support (LOS) will be issued for a period of twelve months to execute agreement (IA, PPA and WUL) and to achieve financial close

Solicited Proposal
• Proposals will be solicited from investors for projects for which feasibility is available
• Process of selection involves invitation of competitive bidding through press
• For competitive bidding, selection process will involve pre-qualification, issuance of RFP, bid, evaluation and award
• Lowest bidder in terms of tariff is selected, who will get tariff approved from NEPRA
• Letter of Support (LOS) will be issued for a period of twelve months to execute project agreements and achieve financial close

Opportunities in Punjab – Solar
Key Statistics
• Punjab is the largest province of Pakistan, home to over 90 million people. It is located between 27. 40°/to 34.-01° N and 69-20°/ to 75-20° E latitude & longitude
• The installed power capacity of Pakistan is around 21,000 MW. Country is facing power shortfall ranging from 3,000 to 5,000 MW. Punjab being the most populous province, consumes 68% of generated national power. The annual demand growth is 6-8%

Solar Energy Potential in Punjab
• Average summer season temperatures range from 40°C to 45°C
• Punjab lies in an area of one of the highest solar irradiation in the world, especially in Southern Punjab. The average daily irradiation amounts to 5-7kWh/m2/day and with the sun shining a good 6-8hours daily, 18-25 MJ/M2 of daily energy is available

General Incentives
• Mandatory purchase of power generated by IPPs
• The Power Purchase will ensure grid connection, off take voltage and interface
• Wheeling allowed for renewable energy producers
• Bonus incentive on power production more than the bench mark level
• NEPRA (National Electric Power Regulatory Authority) is in a process of announcing FIT (Feed in Tariff) soon

Fiscal & Financial Incentives
• 17% Return of Equity assured for Solar Power Projects
• No custom duty or sales tax for machinery, equipment and spares
• Exemption on income tax including turnover rate tax and withholding tax on import
• Repatriation of equity along with dividends freely allowed
• Non-Muslims and non-residents exempted from payment of zakat on dividend paid by the company
• Power generation companies can issue corporate registered bonds and shares at discounted prices
• Foreign banks can underwrite shares and bonds issued by private power companies
• Non-residents can purchase securities issued by Pakistani companies
• Abolition of 5% limit on investment of equity in associated undertakings
• Independent rating agencies are operating in Pakistan to facilitate investors in making informed decisions
• Government of Pakistan will guarantee the terms of executed agreements including payment terms
• Sovereign Guarantee by the Federal Government

Policy Framework
The Federal Policy for Development of Renewable Energy for Power Generation Policy 2006 and Punjab Power Generation Policy 2006 (revised 2009) provides policy framework for development of power generation in Public and private sectors. The Punjab Power Development Board (PPDB) and Punjab Power Development Company Limited (PPDCL) have been established to foster and execute power projects in Private and public sector respectively. PPDB provides one window facility to investors, from the inception to the completion of power projects.

Project Modes

Under Punjab Power Generation Policy Projects can be executed in following modes:
• Independent Power Producer (IPP)
• Public Private Partnership
• Joint Venture (JV)

Opportunities in Punjab – Coal

Key Statistics
• Coal resources of Punjab are mainly found in the Salt Range of Punjab. A study by M/s Snowden Australia has indicated 595 million tons coal reserves in Punjab. These reserves are mainly located in four districts, namely Jhelum, Chakwal, Khushab and Mianwali, and have the potential to generate 3700 MW for 30 years
• The coal field covers an area of about 260 sq. km between Khushab, Dandot in Chakwal and Jhelum district of the Punjab. Coal seams vary in thickness from 0.3 meter to 1.5 meter with an average thickness of 0.75 meters

Punjab Coal Quality
Moisture (%): 03.20-10.80
Ash (%): 12.30-42.20
Volatile Matter (%): 21.50-38.80
Fix Carbon (%): 25.70-44.80
Sulfur (%): 02.60-10.70
Calorific Value: 9472-15801 Btu/lb
Source: Geological Survey of Pakistan

• The installed power capacity of Pakistan is around 21000 MW. Punjab being the most populous province, consumes 68% of generated national power. The annual load growth is 6-8%. Country is facing power shortfall ranging from 3000 to 5000 MW. The current energy mix is 33% hydro power and 67% thermal

Fiscal & Financial Incentives
• Customs duty at the rate of 5% on the import of plant and equipment not manufactured locally
• No levy of sales tax on such plant, machinery and equipment for power generation projects
• Exemption from income tax including turnover tax and withholding tax on imports
• Repatriation of equity along with dividends is freely allowed, subject to the prescribed rules and regulations
• Parties may raise local and foreign finance in accordance with regulations applicable to industry in general. GOP approval may be required in accordance with such regulations
• GOP will guarantee the terms of executed agreements including payment Terms
• Power generation companies can issue corporate registered bonds
• Power Generation companies can issue shares at discounted prices to enable venture capitalists to be provided higher rates of return proportionate to the risk
• Rate of return on equity assured.
• Permission for foreign banks to underwrite the issue of shares and bonds by the private power companies to the extent allowed under the laws of Pakistan
• Non-residents are allowed to purchase securities issued by Pakistani companies without the State Bank of Pakistan’s permissions and subject to the prescribed rules and regulations
• Abolition of 5% limit on investment of equity in associated undertakings
• Assured off take of power generated
• Concession period of 30 years

Policy Framework
Punjab Power Generation Policy 2006 provides policy framework for development of power generation in public and private sectors. The Punjab Power Development Board (PPDB) and Punjab Power Development Company Limited (PPDCL) have been established to foster and execute power projects in private and public sector respectively. PPDB provides one window facility to investors, right from the inception to the completion of power projects.

Project Modes
Punjab’s power generation policy covers the following project modes for public private partnership:
• Independent Power Producer (IPP)
• Public Private Partnership (PPP)
• Joint Venture (JV)

Opportunities in Punjab – Bio-Fuels
Punjab’s Bio-Fuel Potential
• Bio fuels include both biomass and biogas (methane) produced from biodegradable waste, or by the use of crop or animal waste. Punjab’s large agriculture and livestock sector produces an abundant amount of biomass in the form of crop residue and animal waste. Municipal solid waste produced by a large urban population is also available to produce usable methane gas or electricity
• Biomass is considered to be one of the key renewable resources of the future at both small and large scale levels. It already supplies 14% of the world’s primary energy consumption
• Punjab has approximately 11 million tons of biomass available for power generation
• Potential for establishment of biomass power plants in 16 different crop zones
• Five major cities in Punjab, namely, Lahore, Gujranwala, Faisalabad, Multan and Rawalpindi have sufficient municipal waste available to

produce energy
• Lahore has daily waste collection about 5000 tons. Waste disposal sites in Lahore are located at Mehmood Booti, Saggian and Baagrian
• With 32 million livestock population in Punjab, 24 million m3 biogas can be produced

Investment Opportunities
• In setting up:
– Biomass plants (5MW to 30MW)
– Bio gas plants
– Waste to energy plants
• Government facilitation to investor in establishing supply chains for biomass
• Unsolicited proposals for this energy can be submitted to Punjab Power Development Board, which will facilitate investment at every step

Fiscal & Financial Incentives
• GOP will guarantee the terms of executed agreements including payment terms
• Mandatory purchase of power generated by IPPs
• 17% Return of Equity assured for bio-fuel projects
• The Power Purchase will ensure grid connection, off take voltage and interface
• Wheeling arrangements
• Bonus incentive on power production more than the bench mark level
• 5% custom duty on import of plant not manufactured locally
• Exemption on income tax including turnover rate tax and withholding tax on import
• Repatriation of equity along with dividends freely allowed
• Non-Muslims and non-residents exempted from payment of zakat on dividend paid by the company
• Power generation companies can issue corporate registered bonds and shares at discounted prices
• Foreign banks can underwrite shares and bonds issued by private power companies
• Non-residents can purchase securities issued by Pakistani companies
• Abolition of 5% limit on investment of equity in associated undertakings
• Independent rating agencies are operating in Pakistan to facilitate investors in making informed decisions
• Government of Pakistan will guarantee the terms of executed agreements including payment terms
• Sovereign Guarantee by the Federal Government

Policy Framework
The Federal Policy for Development of Renewable Energy, 2006 and Punjab Power Generation Policy 2006 provides policy framework for development of power generation in Public and private sectors. The Punjab Power Development Board (PPDB) and Punjab Power Development Company Limited (PPDCL) have been established to foster and execute power projects in Private and public sector respectively. PPDB provides one window facility to investors, right from the inception to the completion of power projects.
Project Modes

Punjab’s power generation policy covers the following project modes for public private partnership:
• Independent Power Producer (IPP)
• Public Private Partnership (PPP)
• Joint Venture (JV)