Advice on setting up Independent Power Projects in Pakistan

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(Please note that government fee estimates may have changed over time as these are from 2012-2013.For further details you may contact [email protected])

 The Government of Pakistan (“GOP”) welcomes setting up of private power plants using both conventional, as well as alternative energy sources, under the “short-term capacity addition initiative”. For projects using alternative energy sources, guidance and support is available from the Alternative Energy Development Board (“AEDB”). The following steps are involved in setting up of a generation company (“GENCO”) in Pakistan, and in acquiring a license to generate electricity in Pakistan.

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The approval for power projects on a “Build, Own and Operate” basis is sought from the Private Power and Infrastructure Board (“PPIB”), which operates under the Ministry of Water and Power, GOP.

 The investors can propose any plant configuration, subject to its operational feasibility, safety, and environmental concerns.

There are at present 3 IPPs with solar power generation licenses.

  1. DACC Power Generation Company (Pvt.) Limited (50.4 MW);
  2. Pakistan Engineering Council (0.356 MW);
  3. Sanjwal Solar Power (Pvt.) Limited (1.0 MW)

1. Registration with Alternative Energy Development Board (“AEDB”)

An application will be made for the registration of the GENCO with AEDB through an application addressed to the Secretary, AEDB. The application is to be accompanied by the following documents:

  1. Pay Order/Bank Draft in favour of AEDB for USD 100;
  2. GENCO’s profile;
  3. GENCO’s bank statement for the past six months;
  4. Copy of GENCO’s NTN and GST registration certificates;
  5. Last annual audit of GENCO, or if audit not done, then undertaking that the report shall be provided to AEDB as soon as audit is done;

2. Finalization of Project Location

The project has to be established within the jurisdiction of PEPCO/NTDC (basically, any part of Pakistan, excluding Karachi). The proposal must be accompanied by an NOC from PEPCO and NTDC regarding the choice for the project location.

3. Project Size

The project has to be of 50MW capacity or above. The use of a particular technology has to be pre-approved by the PPIB Board.

4. Financing Requirements

 

The debt/equity ratio for the financing of the project should be 20:80 (minimum) and 30:70 (maximum). The Main sponsor of the consortium shall be required to hold a minimum 20% equity in the project for the lock-in period, which will be between the issuance of the LOS until the sixth anniversary of the commissioning of the plant.

5. Term of the Project

 

The term of the project has to be 25-30 years.

6. Sequence of Activities in Setting up of Project

 

            The sequence of activities in setting up of an IPP is as follows:

  1. Registration of GENCO with PPIB by sending letter of request with USD 200 registration fee;
  2. Submission of proposal to PPIB with USD 20,000 processing fee; (Details of the documents required for the proposal are also given below);
  3. Examination and evaluation of proposal and approval by PPIB Board;
  4. Submission of performance guarantee @USD 1000/MW by investor;
  5. Issuance of letter of intent by PPIB;
  6. Submission of tariff petition and generation license application to NEPRA (If the application for generation license and tariff determination is not made within 3 months of issuance of notice to proceed by PPIB, the performance guarantee may be encashed by PPIB);
  7. Tariff determination and license issuance by NEPRA;
  8. Submission of performance guarantee @USD 5000/MW and processing fee of US 80,000 to PPIB;
  9. Issuance of Letter of Support (“LOS”) by PPIB;
  10. Finalization of project agreements, including Implementation Agreement (“IA”) power purchase agreement (“PPA”), fuel supply agreement (if any) etc.
  11. Achievement of financial close within 9 months of issuance of LOS;
  12. Commencement of construction activity.
  13. Achievement of Commercial Operation Date (“COD”) within date stipulated by IA, LOS and PPA.

7. Time Frame

COD is to be achieved within 33 months of issuance of LOS, or 24 months of execution of IA, whichever is earlier.

 

8. Proposal Requirements

           

            The proposal to PPIB should contain the following documents:

 

  1. Power plant details;
  2. Contact person details;
  3. Consortium details, including sponsors, equity percentages of sponsors etc. (This also includes detailed information regarding the financial strength of the sponsor;
  4. Credit rating/financial statement data of sponsors;
  5. Experience of power projects if any;
  6. Consortium agreement if any, and power of attorney in favour of main sponsor of the consortium by the other consortium members;
  7. Affidavit on equity commitment and eligibility requirements;
  8. Endorsement of PEPCO/NTDC for fuel/size/technology of the project;
  9. Site finalization NOC from PEPCO/NTDC;
  10. Confirmation of availability of equipment;
  11. Confirmation of fuel availability (NA for solar).

9. Details of License Application to NEPRA

The license application will be made according to the form specified in Schedule-I of the NEPRA (Licensing) Regulations 1999. The required documents for the license application are as follows:

  1. Fee (Rs. 400,000 for project up to 100MW);
  2. Location (location maps, site map), of project and details of land;
  3. Technology, size of the plant, number of units;
  4. Fuel: type, imported/indigenous, supplier, logistics, pipeline etc.;
  5. Emission values;
  6. Cooling water source: tube wells, sea/river/canal, distance from source;
  7. Interconnection with national grid company, distance and name of nearest grid, voltage level (single line diagram);
  8. Infrastructure: roads, rail, staff colony, amenities;
  9. Project cost, information regarding sources and amounts of equity and debt;
  10. Project commencement and completion schedule with milestones;
  11. ESSA (Environmental and Social Soundness Assessment);
  12. Safety plans, emergency plans;
  13. System studies: load flow, short circuit, stability, reliability;
  14. Plant characteristics: generation voltage, frequency, power factor, automatic generation control, ramping rate, alternative fuel, auxiliary consumption, time(s) required to synchronize to grid;
  15. Control, metering, instrumentation and protection;
  16. Training and development;
  17. Feasibility report;

10. Details of Tariff Petition to NEPRA

 

            The tariff petition to NEPRA is filed along with the license application. The tariff application should be accompanied by the following documents;

  1. Project Location;
  2. Feasibility Study;
  3. Interconnection detail with National Grid;
  4. Summary of Project Cost;
  5. Details of Project Costs including preliminary works, BOQ, Construction management, Pre-COD insurance cost, customs and taxes, interests and other financial charges etc.;
  6. Reference Tariff.