2013-03-21 13:37:21 - New Energy research report from Business Monitor International is now available from Fast Market Research
BMI View: Pakistan's power sector has experienced its greatest upheaval, with the previous Prime Minister Raja Pervez Ashraf forced to resign due to accusations of accepting bribes relating to the building of private power stations. The economy continues to suffer from the shortage of electricity, and at the same time, few steps have been undertaken to reduce the amount of power wastage and thefts. With the unstable political environment and the lack of improvement in its fiscal balances, we believe the country will face greater struggles in its fight against power shortage in the quarters ahead.
Hopes for a smooth election in 2013 have been dashed as the arrest of Prime Minister Raja Pervez Ashraf for his alleged acceptance of bribes
related to the building of private power plants has left the country in chaos, with no permanent solutions to the power shortage in sight for Pakistan. Load shedding across the country continues, and has crippled many industries, including textile and steel companies. 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%. Meanwhile, given that the total amount of bills defaulted by both private and public sectors is now at PKR426bn, the government is looking to install pre-paid metering systems to arrest the growth of these unpaid bills. Despite the overall dim outlook, various foreign renewable energy firms continue to see an open door for expansion in this area.
Full Report Details at
The key trends and 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. 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, as well as payment to an Iranian construction firm operating in Pakistan. Progress on the Iran- Pakistan pipeline project remains slow, stalled by domestic and international opposition to the project.
* Construction of the various dams has met with increasing environmental concerns and financing issues, which threaten to stall works. For example, the World Bank and other international aid agencies have withdrawn their support for the Diamer-Bhasha dam project due to environmental concerns raised by India. While it remains to be seen if financing will indeed come through, recent improvements in Pakistan-Iran relations have made other countries such as the US wary, and has spurred a wave of diplomatic meetings with the Pakistani government which could prompt the provision of funds for these infrastructure projects. More recently, the US has agreed to be the biggest financier for the Diamer- Bhasha dam and provide a major share for the upgrading of the Mangla dam.
* The National Electric Power Regulatory Authority has approved a power tariff hike of PKR1.33 per unit in January 2013, as the cost of generation continued to rise. This comes after a recent tariff increase granted in October, and this trend is likely to continue as a shortage of fuel continues to hold back electricity production.
* Progress of talks between India and Pakistan regarding the sale of electricity and petrol remains slow, with Indian officials citing their Pakistani counterparts keeping a cautious stance. While several suggestions have been raised during the talks, including building a pipeline directly to Lahore, the Pakistan government remains wary of issues such as security and dependability of oil imports from India. However, worsening energy shortages in Pakistan may push Pakistani authorities to push ahead with negotiations, although imports from India are unlikely to exceed supplies from Kuwait.
* During 2013-2022, Pakistan's overall power generation is expected to increase by an annual average of 3.94%, and reach 141.79 terawatt hours (TWh). Hydroelectric generation is expect to drive this growth with an annual 6.15% increase on average, while supported by strong annual growth of 4.49% in gasfired generation. Growth in coal-fired generation is forecast to remain at a more subdued pace of an average 2.32%, while oil-fired generation is estimated to show little growth, increasing by a mere 0.39% on average over the 10 years.
* A government planning commission warned in its 2005 energy security plan that unless power production capacity is increased by 143 gigawatts (GW) in a phased manner by 2030, it will not be possible for the country to sustain higher growth rates in the long run. Pakistan is looking for US$8bn of private power project investment to meet its medium-term target.
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