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Pakistan Power Report Q1 2014 - New Market Research Report

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2013-12-27 09:56:56 - Recently published research from Business Monitor International, "Pakistan Power Report Q1 2014", is now available at Fast Market Research

The Pakistani government continues to struggle to improve the country's power situation with a variety of measures, including a new five-year energy plan that was released on July 21, although success still seems far off. While the National Power Electric Regulatory Authority (NEPRA) has agreed with the federal government's tariff suggestions, we believe that greater difficulty lies in the collection of past debts and prevention of further losses due to bad debts and electricity thefts. Indeed, we maintain that there remains much for the new government to accomplish before the power sector can emerge from the ongoing crisis.

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Although the new government promised to usher in changes to the current myriad of problems, progress has

been slow like its predecessors. Corruption and complicated bureaucracy continue to hamper the business environment, discouraging foreign investment, while provincial and federal governments seem to be losing the fight against the "entitlement" mindset that many citizens have, which often leads to unpaid bills and electricity theft. Even with the government's plan to privatise, either partially all fully, 31 state enterprises we believe this will only provide a temporary relief to the ongoing problem of circular debt that continues to cripple the country. Instead, we maintain that the government must push to end power subsidies and raise taxes to put the country and sector back on the path of growth.

Even though the government has shown much determination in its latest plan, it still faces the same problems that plagued previous governments. Load-shedding across the country remains high across provinces even as summer has given way to cooler weather. The weak power sector continues to arrest the country's economic development, as power outages weigh on productivity while transmission losses and electricity theft often result in more expensive electricity for businesses.

The sector continues to battle with huge losses due to poor performance of assets and power theft, which is estimated by officials from the Water and Power Ministry to be close to 45% of the energy transmitted. The total amount of bills defaulted by both private and public sectors continues to grow, with the government making little headway to install its proposed solutions such as pre-paid metering systems. Prosecution efforts against those who have unpaid bills dating back more than a year have also withered. Indeed, political will to power these efforts onwards seems to have dwindled, while the divide between provincial and central governments continue to complicate matters. Little word has been said on whether the latest energy plan will indeed be implemented as provincial governments will be liable for up to 70% of these unpaid bills and shortfalls will be deducted from federal transfers if these governments fail to recover.

Despite the overall dim outlook, more independent foreign firms are entering the market; in particular, several renewable energy firms have taken advantage of the opportunities to meet the energy gap left by conventional generators.

Recent developments in the Pakistani electricity market include:

* Iran began negotiations with Pakistan in November 2012 on an agreement that would see Iran export 1,000MW of electricity. Both sides aimed to seal the agreement by September 2013. Mjid Namjou, Iranian Minister of Energy, has further expressed keenness to build another power plant on Iran's border, so that his country could boost the total amount of energy available for export by another 2,000 megawatts (MW). Pakistan's neighbour has further pledge to complete the gas pipeline by 2014, a move which could alleviate the fuel shortages faced by certain states. The two countries are looking at alternative forms of payment given Pakistan's weak fiscal balances and the international sanctions on Iran. These include the former paying for electricity with wheat, rice and steel, as well as payment to an Iranian construction firm operating in Pakistan. Progress on the Iran-Pakistan pipeline project remains slow, although both sides continue to speak positively on the project, mainly stalled by domestic and international opposition to the project.
* Construction of the various dams continues to be slowed due to increasing environmental concerns, cost escalation and financing issues. Environmental disagreements continues to be a source of tension between neighbours like India as both sides are worried that dam constructions could impact water flows, and possibly affect the lives of civilians living downstream. Private sector partnerships seem to have taken a backseat in favour of public investment supported by a mixture of funding from international agencies and sale of state owned assets. The building of the Neelum Jhelum project is a prime example, with its costs estimated to have escalated four times to PKR321bn (US$3bn). While the government has so far secured additional funding from Saudi Arabia (US$100mn) and OPEC Fund for International Development (US$50mn), the project still suffers from a shortfall of US$475mn of foreign funding. While loans have been agreed upon, cashflows have not been as smooth as many foreign governments such as China and Abu Dhabi are keen to seek resolution on other outstanding issues.

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at

About Fast Market Research

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Bill Thompson
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