POWER S PDATE - pacra.com.pk · Nuclear IESCO Industrial Water LESCO National Transmission and...

POWER SECTOR – UPDATE

September 2013

Power – Supply Chain Performance National Power

PolicyCost vs Price –Settlement of Circular Debt

Business & Financial Risk

Outlook on the Sector

p

Supply Chain – Largely a single buyer modelPower Sector - Supply Chain

Transmission Distribution Consumption

F Oil FESCO

Generation

Power Sector Supply Chain

Furnance Oil FESCO

Gas GEPCO DomesticCoal HESCO

Independent Power Plants, Generations Companies, and Thermal

CPPA

Coal HESCO

Nuclear IESCO Industrial

Water LESCONational

Transmission and Distribution Company

KESC

Dams

Solar MEPCO Commercial

Wind PESCOHydel IPPs QESCO Others

Distribution Company

Independent Power Plants

Renewable

yde s Q SCO Ot e sTESCO

KESC KESC





Mix

Power | Installed Capacity and Power Mix

%Jun-12 Jun-13 %

IPPs 8,560 8,560 36%

Generation Capacity (MWH) InstalledMix

GENCOs 4,720 4,720 20%KESC 2,381 2,381 10%Others (CPPs/SPPs) 324 324 1%RPPs 50 - 0%

Thermal 68%

WAPDA 6,587 6,612 28%IPPs 129 213 1%

Nuclear Two Nuclear plants 787 787 3% 3%Wind IPPs 50 0% 0%

Hydel29%

Wind IPPs - 50 0% 0%Import Mainly from Iran - - 0% 0%

Total 23,538 23,647 100% 100%FY09 FY10 FY11 FY12 FY13

Generation (GWh) 96 647 99 766 100 582 98 664 102 989Generation (GWh) 96,647 99,766 100,582 98,664 102,989 Growth (%) -0.7% 3.2% 0.8% -1.9% 4.4%

Generation(MWh) 11,033 11,389 11,482 11,263 11,757 Capacity Factor (Utilization) 54% 53% 49% 48% 50%

We only use half of what we have



Business &Financial

RiskOutlook on the

Sector

S G ti % C t (%) C t (PKR) /U it

Power | Generation Cost & Cost Ranking

Source Generation% Cost (%) Cost (PKR) /UnitRPPs 0% 0.0% - WAPDA 28% 0.3% 0.07 Wind\ IPPs 0% 0.0% 0.46 Hydel IPPs 1% 0.1% 0.86 T N l l t 4% 0 6% 1 22Two Nuclear plants 4% 0.6% 1.22 KESC 14% 8.7% 4.30 Others (CPPs/SPPs) 1% 1.7% 9.79 ( )Mainly from Iran 0% 0.5% 9.85 IPPs 39% 66.5% 12.11 GENCO 12% 21 6% 12 23 GENCOs remain mostGENCOs 12% 21.6% 12.23 Avg Cost (PKR) / Unit 100% 100% 7.08

GENCOs remain most inefficient even with gas



Business &Financial

RiskOutlook on the

Sector

Power | Fuel Mix and Cost Per Unit

Source Generation% Cost (%) Cost (PKR) /UnitHydel 34% 0.4% 0.09 Wind 0% 0 0% 0 45Wind 0% 0.0% 0.45 Nuclear 4% 0.7% 1.22 Coal 0% 0.0% 4.41 Gas 23% 15 7% 5 06Gas 23% 15.7% 5.06 Import 0% 0.5% 9.75 Mixed 1% 1.7% 9.99 RFO 35% 76 8% 16 48RFO 35% 76.8% 16.48 HSD 1% 4.1% 21.12 Gross NTDC 100% 100.0% 7.54

Based on Energy Procurement Reports by CPPA for 12 months FY13by CPPA for 12 months FY13



Business &Financial

RiskOutlook on the

Sector

Power | Distribution Efficiency

R R i (%)

Allowed Actual Delta (%)FESCO 10 83 10 91 (0 08)

PKR 234bln comesout as loss to GoP

DISCO FY11 FY12LESCO 98.10 96.13 GEPCO 98.84 98.46 FESCO 99 76 98 45

Recovery Ratio (%)T&D Losses (%)

FESCO 10.83 10.91 (0.08) IESCO 9.00 9.52 (0.52) GEPCO 10.50 11.24 (0.74) LESCO 12 00 13 51 (1 51)

based on FY13 pricesand latest available

on T&D losses

FESCO 99.76 98.45 IESCO 93.38 95.85 MEPCO 97.97 97.25 Punjab 97.72 97.03 HESCO 59.10 69.12LESCO 12.00 13.51 (1.51)

QESCO 18.00 20.87 (2.87) MEPCO 15.00 17.94 (2.94) HESCO 22 00 27 73 (5 73)

on T&D losses

PKR 57bln comes out asloss to GoP based on

HESCO 59.10 69.12 SEPCO - 50.88 KESC 85.60 88.70 Sindh 81.08 86.41 PESCO 82.22 82.48 HESCO 22.00 27.73 (5.73)

PESCO 28.00 35.97 (7.97) KESC 21.00 29.70 (8.70) SEPCO 28 00 39 51 (11 51)

loss to GoP based onFY13 prices and latestavailable Recovery Ratio

TESCO 66.33 6.32 KPK 78.39 67.90 QESCO 40.99 36.15 Baluchistan 40.99 36.15 Co ntr 89 83 86 00SEPCO 28.00 39.51 (11.51) Country 89.83 86.00



Business &Financial

RiskOutlook on the

Sector

Power | Consumption



Business &Financial

RiskOutlook on the

Sector

Peak Demand Supply Shortfall (MW)

Key Targets of National Power Policy

1 U = 1000 0 4500-5000

Peak Demand Supply Shortfall (MW)

1U =2 2 9.99 12

Average Commercial Cost (PKR /KwH)

By 2017, GoP, under1U 2 2 9.99 12

T&D L (%)

National power Policy,aspires this situation

1U = 5 0 < 16 22

T&D Loss (%) aspires this situation

1U = 10% 50 87 95

Collection ratio (%)

Scale in Unit Target Level Current Level



Business &Financial

RiskOutlook on the

Sector

Supply StrategyDemand Management

S Affordable Power Strategy

Strategies| National Power Policy

Supply Strategy

• New Economic model (targeting subsidy to poor only, supply of expensive but dedicated electricity to CPPs/

Strategy

• Improve Technology Standards (Ban imports of non-efficient consumer electronics in Pakistan,

Affordable Power Strategy

• Move towards Cheaper Fuels (Identification and conversion of expensive RFO/HSD plants to gas or coaldedicated electricity to CPPs/

Generator users, subsidy phasing out in 3 years)

• Bring Existing Capacity online (Immediate retirement of circular debt, Maximum

electronics in Pakistan, Provide Pakistani manufacturers 3 years time to bring products at par with the efficiency)

• Time of Use (ToU) tariffs

to gas or coal• Gas conservation for Power

(Increase gas price except for poor residents, reduction in gas utilization in CNG and UFGof circular debt, Maximum

payables days limit - - RFO : 45-60 days/ Gas 30-45 days, financing to idle plants

• Complete Pipeline Projects (prioritization to projects that

( )(Impose specific timing and restriction for public places -shopping and recreational activities , commercial lightening e.c) and I d i f T U

• - - 10% gas diversion can generate 2,000MW , divert gas and ensure firm supply to power plants)

(p p jcan be brought online in 2-3 years especially coal, run of the run, and bio-mass

• Assign key project manager from MoWP to each pipeline

Introduction of ToU meters for peak and off-peak prices

• Pricing as per new economic model (targeting subsidy to poor only, supply of

i b t d di t dproject expensive but dedicated electricity to CPPs/ Generator users, subsidy phasing out in 3 years)



Business &Financial

RiskOutlook on the

Sector

G ti St t T i i St t


Supply -Chain Strategy

• Reduction in allocation of Fuel to GENCOs until higher efficiency

Generation Strategy

• Provide fuel to Efficient plants (Heat rate testing, prioritize and

Transmission Strategy

• Optimize Transmission (Sign performance contracts with NTDC -u g e e c e cy

is achieved, Divert fuel to more efficient IPPs -- 4,000mtoe diversion can save PKR 75bln/annum PKR

g, pallocate fuel based on efficiency, make allocation and efficiency level transparent online

-2.5% allowed losses vs3.6% actual, Dispatch based on economic order, Use of technology with75bln/annum - - PKR

13bln/M on GENCOs produces 650MW vsPKR 10bln/M to IPPs produces 1,150MW

transparent online, continuous monitoring of efficiency of plants)

• Privatization of GENCOs ( Either

technology with experience HR)

• Redesigning/Redefing National Grid (New plants to be built closer

• Stringent monitoring and policy fro GENCOs (performance contracts, fuel procurement contracts measurement

privatize or lease GENCOs through O&M contracts, Pilot 2 GENCOs immediately, prepare other GENCO

to load centres, redesign merit order, Expand HVT lines)

• Incentivize private sector (New businesscontracts, measurement

of quantity and quality of fuel etc.)

prepare other GENCO for privatization

sector (New business model based upon whole sale transactions, exchanges and wheeling charges)



Business &Financial

RiskOutlook on the

Sector

Di t ib ti St tFinancial Efficieny Governance Strategy


Distribution Strategy

• Performance Contracts (Short Term): Sign Performance contracts

i h k k h ld

yStrategy

• Collect Receivables (Automatic Adjustment of amounts owed by

i & d

Governance Strategy

• Reform & Coordinate Planning: Official Coordination Council b/w M W&P M P M F dwith key stakeholders

including CEOs of DISCOs, Coverage of Perfromace contracts: reduction in Dist losses

provinces & govt. depts from NFC award and department budget to be done by independent adjuster in 3-6 Ms,

d f

MoW&P, MoP, MoF, and PC plus representatives of provinces , GB and AJK

• Reforms for structural and regulatory aspects of

(Technical and Theft), full collection of DISCOs receivables using

• Smart metering and Feeder level accounting

transparent procedure for future billing/collection, GST refund collection from FBR with appropriate mechanism to

id f b ild )

NEPRA & OGRA• Restructuring of MoW&P

(Power sector reforms -PEPCO, CPPA, NTDC)

g(Short Term): Smart meters installation to be complated in next 2 months - 65% complete)

• Privatization of DISCIOs -

avoid future buildups)• Punish defaulter and

elimiate Theft (Eliminate T&D theft, focus loadsheddimg in low Privatization of DISCIOs

- Privatize few firts, dev elop P&L of DISCOs at feeder level, privatize all over a period

gcollection areas, dis-connections after 60 days overdue, Reconnections with pre-paid card based meters))



Business &Financial

RiskOutlook on the

Sector

Strategies | National Power Policy

Short term

B i i ti

Medium term

F l

Long term > 5yrs

C l t L• Bring existing capacity online

• Stop pilferage• Rationalize

• Focus on low cost pipeline

• PPP projects in coal and hydro

• Complete Large infrastructure hydro projects

• Retire High• Rationalize tariff

• Sign performance

coal and hydro Retire High cost energy Contracts

pcontracts

• Transparency through website

Responsibility | NPP implementation | Council of Common Interests (CCI)



Business &Financial

RiskOutlook on the

Sector

Country Sales Mix 1

Eff ti 16 05 12 Eff ti 05 08 13 ICategorywise Weighted Average GoP Notified Tariff 2

Power | How much we pay?

Effective 16.05.12 Effective 05.08.13 IncreaseConsumer CategoryResidential 46.9% 7.61 7.61 - Industrial 32.2% 9.26 13.04 41%

PKR per Unit

% %Agriculture 7.9% 8.61 10.50 22%Commercial 6.9% 11.71 15.76 35%Bulk Supply 3.5% 9.21 13.71 49%AJK 2.4% 6.33 12.49 97%Public Lighting 0.3% 0.04 0.04 - Residential Colonies attached to Industries 0.0% 0.00 0.00 - Electricity Charge (EC) per Unit (PKR) 100% 8 51 10 46 23%Electricity Charge (EC) per Unit (PKR) 100% 8.51 10.46 23%Increase in EC per Unit (PKR) 1.95

Simple Average Increase 49%Weighted Average Increase 40%

5 consumer categories

2 Weighted average for each category is calculated as sales % in each sub-category multiplied by respective tariff as notified by GoP

1 Based on weighted average sales mix of 6 DISCOS (LESCO, FESCO, MEPCO, PESCO, IESCO, and GEPCO : ~75% of sanctioned load) as reported in Form-27 of regulatory accounts/ Annual Petition filed by each DISCO for FY14

g g





Power | How much we will pay?Country Sales Mix 1 Categorywise Weighted Average GoP Notified Tariff 2

Effective 16.05.12 Effective 05.08.13 IncreaseConsumer CategoryResidential 3 (Effective 01.10.13) 46.9% 7.61 9.89 30%I d t i l 32 2% 9 26 13 04 41%

PKR per Unit

Industrial 32.2% 9.26 13.04 41%Agriculture 7.9% 8.61 10.50 22%Commercial 6.9% 11.71 15.76 35%Bulk Supply 3.5% 9.21 13.71 49%AJK 2.4% 6.33 12.49 97%Public Lighting 0.3% 0.04 0.04 - Residential Colonies attached to Industries 0.0% 0.00 0.00 - Electricity Charge (EC) per Unit (PKR) 8 51 11 53 36%Electricity Charge (EC) per Unit (PKR) 8.51 11.53 36%Increase in EC per Unit (PKR) 3.02

Simple Average Increase 46%Weighted Average Increase 35%

6 consumer categories

2 W i ht d f h t i l l t d l % i h b t lti li d b ti t iff tifi d b G P

1 Based on weighted average sales mix of 6 DISCOS (LESCO, FESCO, MEPCO, PESCO, IESCO, and GEPCO : ~75% of sanctioned load) as reported in Form-27 of regulatory accounts/ Annual Petition filed by each DISCO for FY14

Weighted average for each category is calculated as sales % in each sub-category multiplied by respective tariff as notified by GoP

3 GoP's commitment to IMF as part of 36 Months Extended finance facility under Energy Sector Reforms ( IMF would be monitoring the implementation under Technical Memorandum of Understanding ). In other words it is inevitable!

Power | How much it costs?Assumptions TotalSold Actual 2012 (mln Units) 7,537 8,580 6,178 14,467 10,049 8,528 55,339 Share % 14% 16% 11% 26% 18% 15%FY13 IESCO FESCO GEPCO LESCO MEPCO PESCOFY13 IESCO FESCO GEPCO LESCO MEPCO PESCODISCO's Tariff charged 10.51 11.29 13.06 11.69 13.30 13.62 Weighted averageEnergy Cost (7.54) (7.54) (7.54) (7.54) (7.54) (7.54) 7.54

2.97 3.74 5.52 4.14 5.76 6.08 Weighted Average

0.40 0.58 0.62 1.08 1.05 0.94 4.660.40 0.58 0.62 1.08 1.05 0.94 4.66 Cost to GoP 12.2 12.2 12.2 Consumer Price 8.51 10.46 11.53Subsidy 3.70 1.75 0.68 No. of Units 81,361 81,361 81,361

Subsidy 301 142 55

As per Budget FY14 349 220

NJS (8,136) GST (110,762)

As per Budget FY14 349 220



Business &Financial

RiskOutlook on the

Sector

Net Subsidy (118,549)

Financial Risk [Inter-corporate debt & Subsidy]

I C Ch i f DEBTS

Payable to DISCOs , KESC Low RecoveriesL

Inter-Corporate Chain of DEBTS

End Consumer

LossesReceivable from Consumers Subsidy

Payable to NTDC

Receivable from DISCOs KESC

DISCOs, KESC

Receivable from DISCOs, KESCPayable to IPPs, GENCOs

Receivable from NTDCPayable to Fuel Suppliers

NTDC , KESC

IPPs , GENCOsPayable to Fuel Suppliers

Receivable from IPPs, GENCOs, KESCPayable to E&P Companies

Fuel Suppliers

Receivable from Fuel SuppliersE&P Companies



Business &Financial

RiskOutlook on the

Sector

PKR bln

Gross Transaction Amount 503 Liquidated Damages (23)

Circular Debt Settlement

And the dust settlesLiquidated Damages (23)

Total (Excluding LDs) 480

Gross Cash Transaction 342Dividend received (20)

dust settles…..

Total Net Cash Settlement 1 322 Non- Cash Transaction2 138

Circular Debt Settlement PKR bln

Cash IPPs 161PIB OGDCL 56 PKR bln

Circular Debt Settlement

PIB PPL 23PSO 81

Cash 33PIB 48

Non-Cash Settlement WHE 90NTDC 10Gencos 15PIB 48

322

Gencos 15Nuclear Plants 23Total Non-Cash 138

T l (N f LD d Di id d)1 Effective 28.06.122 Total (Net of LDs and Dividend) 4802 Effective 21.07.13



Business &Financial

RiskOutlook on the

Sector

Business Risk | Assessment

1. Demand Supply Gap [Supply in Deficit]2. Sector Lifecycle [Growth]3. Sector Competitiveness [Low Buyer Power ; Low Supplier Power]p y pp4. Sector Significance to suppliers [High]



Business Risk –Power Sector &Financial

Risk


Business Risk | Key Performance Indicators

1. Generation Efficiencyi i i ib i l2. Transmission & Distribution losses

3. Recovery of bills/receivables



Business &Financial

RiskOutlook on the

Sector

Financial Risk [Key Performance Indicators]

1. Working Capital Management [agreement to1. Working Capital Management [agreement to Increase the payable days of NTDC]

2. Debt Repayment Behavior3 T&D L3. T&D Losses4. Achieving targets as per agreement under IMF

programprogram5. Implementation of National power Policy



Business &Financial

RiskOutlook on the

Sector

What’s the outlook | Stable [ from Negative]

Business Risk:Generation Segment: low to Medium.Transmission and Distribution Segment: mediumTransmission and Distribution Segment: medium.

Financial Risk:Generation, Transmission and Distribution Segment: medium



Business &Financial

RiskOutlook on the

Sector

Bibliography

1. National Power Policy 2013: http://www.mowp.gov.pk/2. Memorandum on Economic and Financial Policies for 2013/14-2015/16 :

http://www.finance.gov.pk/MEFP_201314_201516.pdf3. Technical Memorandum of Understanding: http://www.finance.gov.pk/tmu.pdf

National Electric Power Regulatory Authority (NEPRA) : www.nepra.org.pk4. Petitions filed by IESCO , PESCO, LESCO, GEPCO, FESCO, MEPCO :

k/T iff/P i i /DISCO / h // k/ww.nepra.org.pk/Tariff/Petitions/DISCOs/ : http://www.nepra.org.pk/5. Decision of the Authority (NEPRA) in the matter of Fuel Charges Adjustment for 12 months (Jul12 –Jun13)

: http://www.nepra.org.pk/6. Water and Power Regulatory Authority (WAPDA) : www.wapda.gov.pk7 P ki El i P C (PEPCO) k7. Pakistan Electric Power Company (PEPCO): www.pepco.gov.pk8. National Transmission and Despatch Company (NTDC) : www.ntdc.com.pk9. State of Industry Report 2011-2012 : http://www.nepra.org.pk/industryreports.htm10. Private Power and Infrastructure Board (PPIB) : www.ppib.gov.pk

Note : All year wise Electricity Statistics of Pakistan relate to Fiscal Year (which starts from Jul and ends in Jun)

Analysts Rana Muhammad Nadeemd @

Samiya Mukhtari @

Naureen Hyath t@

Humza HussainH h i @[email protected] [email protected] [email protected] [email protected]

Contact number: +92 42 3586 9504

DISCLAIMERSCPACRA has used due care in preparation of this document. Our information has been obtainedfrom sources we consider to be reliable but its accuracy or completeness is not guaranteed.The information in this document may be copied or otherwise reproduced, in whole or in part,

id d th i d l k l d d Th t ti h ld t b li dprovided the source is duly acknowledged. The presentation should not be relied upon asprofessional advice.

POWER S PDATE - pacra.com.pk · Nuclear IESCO Industrial Water LESCO National Transmission and...

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