Key Players in the Pakistani Power Sector

 

PPIB role and creation

  • Created in August 1994 to promote private investments in power sector
  • Acts as One-Window facilitator on behalf of GOP, its Ministries/ Departments
  • Executes Implementation Agreements and provides GOP Guarantees on behalf of President of Pakistan duly authorized by Prime Minister of Pakistan
  • Facilitates IPPs in executing PPA, WUA with relevant GOP agencies
  • Monitoring of IPPs progress
  • Provides support to Ministry of Water & Power, Provinces / AJ&K technical, financial and legal matters
  • Coordination/Liaisons with local and multilateral development/ Financial Institutions
  • PPIB received statutory status on 6th March 2012 through an Act of the Parliament

Achievements of PPIB:

  • Successfully managed to induct 27 independent private power projects (IPPs) totaling about 6928 MW
  • Attracted an investment of around US$ 8 billion.
  • Attracted leading international / local investors and lenders to the Pakistan Power Sector
  • Contributed in development of domestic capital markets.
  • Supported economic growth and enhanced power supply

Incentives for foreign and local investment in the Power Sector of Pakistan

  • Exemption from Corporate Income Tax, Turnover Tax and Withholding Tax, no Sales Tax, only 5% concessionary Import Duty on plant & equipment not manufactured locally
  • GOP Guarantees obligations of power purchaser and provinces
  • GOP provides protection against Political Force Majeure, change in law and Change in duties & taxes
  • Power Purchaser to bear hydrological risk for hydropower projects
  • Payment of compensation in case of termination due to GOP Event of Default
  • Tariff adjustments for variation in currency exchange rates and fuel prices
  • Tariff indexation for inflation (US CPI & Pak WPI)
  • Government ensures conversion of Pak Rupee & remittance of foreign exchange for project-related payments

Barriers to entry and foreign investment in the Pakistan Power Sector

  • Pakistan is facing difficulties in attracting new investments in power sector due to Circular Debt.
  • Fuel choice for new power generation projects
  • Gas supply to existing IPPs uncertain on long-term basis (beyond June 2011)
  • Oil Logistics and Transportation Issues
  • Furnace oil prices soaring high, entering into the realm of unaffordability for the overall economy of Pakistan
  • Huge infrastructure requirements to support coal and hydro projects.
  • IPPs facing problems due to frequent tripping’s in the transmission system
  • Security (Law & Order) issues
  • Difficulties in arranging local & foreign financing for new private power projects

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