$2.4bn Kohala hydropower deal finalised

[SBD-3]

The tariff is very high. No doubt about it. This is the cost of being a nation led by donkeys. Had the contract been signed in Musharraf years, we would have had at least 2500 MW in our system (1000 MW from Kohala, and 1500 MW thermal subsidised by cheaper Kohala hydroelectric power). Today nobody is interested in investing in Pakistan, and we are helpless because of our own mistakes. I do not know if I should thank Chinese for this investment or cry at the high tariff? Could Sharifs not negotiate a better deal?

Its actually a marginal tarrif structure. 8.9 Cents is for a specific capacity, any capacity higher than that would be at nominal rate. Plus with 9 cent, the cost of electricity to business sector can be drastically reduced. At the moment, commercial tariff is at min ~12.50 in off peak and as high as 19.50 in peak hours. dedicate these resources to business community, reduce their tariff to boost their cost efficiency and redistribute the savings as subsidy to residential customers.

Best option for Pakistan is to purchase Electricity form Gujarat. You can definitely get it at cost bellow the agreement you signed.

Well that's more connected to political dynamics than economics. Any such decision is a tough nut to crack for civilian government in Pakistan.

 

[Chak Bamu]

@SBD-3 I wish I could say that I am convinced. We are desperate and everyone knows it.

 

[Kabira]

Its actually a marginal tarrif structure. 8.9 Cents is for a specific capacity, any capacity higher than that would be at nominal rate. Plus with 9 cent, the cost of electricity to business sector can be drastically reduced. At the moment, commercial tariff is at min ~12.50 in off peak and as high as 19.50 in peak hours. dedicate these resources to business community, reduce their tariff to boost their cost efficiency and redistribute the savings as subsidy to residential customers.


Well that's more connected to political dynamics than economics. Any such decision is a tough nut to crack for civilian government in Pakistan.

Usually it cost Rs 1.65 per unit for hydro, so 9 cent is 5-6 times higher.

 

[Donatello]

current furnace oil based plants generate at around 18-21 Rs/unit..................

Just saying

Usually it cost Rs 1.65 per unit for hydro, so 9 cent is 5-6 times higher.

It may be the cost of generation, since essentially water flow is free. But to make the project feasible and recover the investment cost, selling cost would be a lot higher.

 

[SBD-3]

@SBD-3 I wish I could say that I am convinced. We are desperate and everyone knows it.

Yep its just like making the best out of worst. Energy drives activity, activity drives economy, economy drives fiscals and fiscals drive investment.

 

[Kabira]

current furnace oil based plants generate at around 18-21 Rs/unit..................

Just saying



It may be the cost of generation, since essentially water flow is free. But to make the project feasible and recover the investment cost, selling cost would be a lot higher.

Still 8.9 is costly for hydro, Pakistan is desperate at the moment. 5.1 after 12 years seem fair.

 

[SBD-3]

Usually it cost Rs 1.65 per unit for hydro, so 9 cent is 5-6 times higher.

Here is an example of hydal IPP being recently set
Laraib Energy Limited - Pakistan's First Hydel IPP
BOT condition being applied to new hydal IPPs. And almost all of the projects being set up by Chinese will also follow the similar structure where they will be transferred to provincial governments or the management company after the completion of a specified term

The Project has been developed under Build-Own-Operate-Transfer (BOOT) basis, whereby it would be transferred to the Government of AJ&K free of cost at the end of a 25-year term.

And

The energy generated by the Project is purchased by a single buyer i.e. Pakistan’s National Transmission and Dispatch Company Limited (the “NTDC”) under a long term Power Purchase Agreement (the “PPA”). Under the PPA the hydrological risk is borne by the Power Purchaser through guaranteed payment for fixed costs like debt servicing, O&M, ROE and insurance. A cost plus tariff mechanism is in place under the PPA and the Project has been allowed a tariff of PKR 6.8362/KWh (US cents 8.5453/KWh) at Financial Closing which will be adjusted for certain allowed reopeners at the Commercial Operations Date.

Plus the excess electricity generated will be provided at a nominal tariff rate-I read it somewhere containing the details of the project-
So consider that the investor would have to not only get his principal but also return on investment in the specified period. You wouldn't want anyone be willing to offer 2 Cents a unit.

 

[Kabira]

Here is an example of hydal IPP being recently set
Laraib Energy Limited - Pakistan's First Hydel IPP
BOT condition being applied to new hydal IPPs. And almost all of the projects being set up by Chinese will also follow the similar structure where they will be transferred to provincial governments or the management company after the completion of a specified term

And

Plus the excess electricity generated will be provided at a nominal tariff rate-I read it somewhere containing the details of the project-
So consider that the investor would have to not only get his principal but also return on investment in the specified period. You wouldn't want anyone be willing to offer 2 Cents a unit.

Also $2.4 billion investment in dam will generate economic activity. Anyway didn't China offer something similar for Bunji dam 7100mw and Pak refused? I wonder if this time Pakistan will accept the deal?

 

[Edevelop]

No energy projects in Musharraf's 9 years and PPP's 5 years + growing population = load shedding

When you build hydroprojects you secure future... Just get something done for once. More delays will cause more costs.

 

[Cyberian]

Another one of those deal at the "feasibility" stage. I have been reading about these feasible stage agreements for a decade now and very little has actually happened.

The Administration of Prime Minister Nawaz Sharif will need to Govern for at least 2 terms without disruption for this deal to come to fruition.

 

[FaujHistorian]

Another one of those deal sat the "feasibility" stage. I have been reading about these feasible stage agreements for a decade now and very little has actually happened.

The Administration of Prime Minister Nawaz Sharif will need to Govern for at least 2 terms without disruption for this deal to come to fruition.

Good point.

I wonder if our anarchist-socialist elite will allow NS to complete even one term.

 

[xyxmt]

I dont trust Pakistani officials, govt and news...we need to hear it from Chinese otherwise its just all paper projects.

 

[VCheng]

The tariff is very high. No doubt about it. This is the cost of being a nation led by donkeys. Had the contract been signed in Musharraf years, we would have had at least 2500 MW in our system (1000 MW from Kohala, and 1500 MW thermal subsidised by cheaper Kohala hydroelectric power). Today nobody is interested in investing in Pakistan, and we are helpless because of our own mistakes. I do not know if I should thank Chinese for this investment or cry at the high tariff? Could Sharifs not negotiate a better deal?

Please do not forget that the real crisis is not in power generation, it is in distributing it and then collecting the money owed for supplying it.

Pakistan hydro power potential is 100,000MW.

Can you please post a source for this claim?

 

[Viper0011.]

So china will finance 3 dams, Korat, Sukki kanari and now this.

There are about 8 other large projects that they've already financed and provided part-loans for. There are a couple of threads on here that show you details on those projects, along with pictures and progress details being made.

Please do not forget that the real crisis is not in power generation, it is in distributing it and then collecting the money owed for supplying it.

Common man, seriously? I know your political focus is towards IK but don't put your personal bias into such a critical issue the entire country faces. There is a 5000 to 7500 MGW shortfall every year. That further increases due to distribution losses. But to say that there are not real crisis in power generation is a VERY false statement and its misleading readers to hell.

With 5000 to 7500 MGW gap means you product 65% of the needed electricity. The current government wants to take this number to 80% in the next 2 years, to 100% by the end of 2017 and go in surplus by 2019 and then go to 25000 MGW by the 2024.

That's a great goal to achieve. Your energy production will be doubled compared to what was being produced for the past 70 years!!! That's HUGE progress made in 5 years of the current government's tenure than what had been going on for the past 70 years. Have courtesy to support the good work and give credit where needed please.

So china will finance 3 dams, Korat, Sukki kanari and now this.

Here's another one, so there are total of 12 projects, 8 of which are large and the 4 are medium level. The government wants to double up the energy production and water saving capabit by 2018.
-------------------------------------------------------------------------------------------------------
The Executive Committee of National Economic Council (ECNEC) approved a summary for the setting up of 128 MW "Keyal Khwar Hydropower Project" with a rationalised cost of Rs 27.8 billion and an "Emergency Plan for Polio Eradication" from the country with a total capital cost of $326.838 million. The summary was approved by the ECNEC, under Finance Minister Ishaq Dar, at the Prime Minister's Office on Friday.

The summary was moved by Ministry of Planning, Development and Reforms. The energy sector's "Keyal Khwar Hydropower Project" of 128MW would be launched in District Kohistan of Khyber Pakhtunkhawa. The project will be completed by WAPDA in four years at a cost of Rs 27.8 billion. The project is proposed to be funded by PSDP and has a FEC of Rs 10.988 billion. The project will be interconnected with the national grid by 2.8-km long, 132 kV double circuit transmission line terminated at the Duber Khawar HPP switchyard. The annual energy generation has been estimated at 418 GWh.
------------------------------------------------------------------------------------------------------------

 

[HariPrasad]

That is not the point. It is about investment in infrastructure.

But some member said that it will not be used for water storage. If you can store water, I can agree with you. If not, it should be seen power plant angle and L1 option should be choose.

Anyway Pakistan will import electricity from Tajikistan at 5 cent per unit.

It is great. I exactly advocate the same.