Ministry of Energy (Power Division)

TNB upbeat on power plant issues in Pakistan Monday, 26 August 2013 10:06 John Gilbert

There could be light at the end of the tunnel for Tenaga Nasional Bhd’s (TNB) stalled power plant project in Pakistan, with the country’s newly elected government promising to put an end to its chronic power shortage problems.

Pakistan’s High Commissioner to Malaysia Shahid M.G. Kiani said the new administration is putting emphasis on power production, and TNB should use this “window of opportunity” to propose a solution to the power plant project undertaken by its subsidiary Liberty Power Ltd.

Liberty owns and operates a 235MW gas-fired power plant in Sindh province but has been unable to make money because of the disparity between the price of gas it buys from Sui Northern Gas Pipelines Ltd (SNGPL) and the price of electricity it sells to Pakistan’s Water and Power Development Authority (Wapda).

As a result, Liberty’s proposed second power plant in the province has been delayed with costs more than doubled from the original US$225 million (RM742.5 million).

Touching on discussion between TNB and the Pakistan government, Shahid said both parties have come to a preliminary understanding, especially at TNB’s level in Pakistan. “We are currently discussing with a number of stakeholders in Pakistan which both experts from TNB and Pakistan will meet within next few months and discuss unresolved issues on power and strategic plans to further TNB’s power investment and commitment in Pakistan,” Shahid said.

Shahid pointed out the power provider should seriously look into the Pakistan market and have been engaging further with Liberty and TNB Repair and Maintenance Sdn Bhd, a subsidiary of TNB in Pakistan that looks after main- tenance and repair.

He said Pakistan has been facing acute energy shortage in the past five to six years and have not planned to build power plants due to government issues.

TNB’s problem was brought to the attention of the previous government which said the legal agreements binding the project, including the gas supply and power purchase, need to be changed.

“The discrepancies in prices arose due to the method in which TNB worked out on the price of gas and the price of electricity is different and TNB wants to harmonise both parameters so that price of gas and the selling price of electricity align with each other.

“All these agreements are back-to-back agreements and amending one agreement will have effects on other agreements and stakeholders in Wapda, Ministry of Petroleum and Natural Resources and the Private Power and Infrastructure Board is required to give their consensus on the amendments in the agreements,” Shahid told The Malaysian Reserve recently.

He said with this, TNB’s expansion of the second-phase did not take off as the disparity was unresolved at Pakistan government level, however, these 15-year agreements will expire in 2015 and it would be a good time for TNB to propose to the Pakistan government the necessary amendments according to their assessment to these agreements.

According to Pakistan Power Report First-Quarter 2013 published by Business Monitor International, Pakistan’s overall power generation is expected to increase by an annual average of 3.86%, reaching 135.5 terawatt hours (TWh) between 2013-2021.

A government planning commission has warned in its 2005 energy security plan that unless power production capacity is increased by 143GW in a phased manner by 2030, it will not be possible for the country to sustain higher growth rates in the long run.

The report said between 2013- 2021, net power consumption set to increase from 77.09TWh to 110.26TWh which works out a projection for the annual growth rate for electricity demand to an average of 3.8% over the forecast period. Pakistan is looking for US$8 billion of private power project investment to meet its medium-term target, it said further.

The Pakistan Credit Rating Agency Ltd assistant manager Samiya Mukhtar said considering the increasing electricity supply deficit in Pakistan and government’s priority to resolve power sector issues, there is likelihood that Pakistan government support would be forthcoming to power sector participants.

The country is also facing the “circular debt/ inter-corporate debt” issue wherein the entire power sector chain is hit by overdue receivables, thus cashflow constraints. TNBLiberty is reported to have served a notice of intent to terminate agreement with the government in April 2013 however, after the formulation of new government, the settlement of overdue receivables was a major step showing seriousness of the government towards power sector.