Given the special characteristics of a hydel power project, response to the advertised - Expression of Interest (EOI) by the Private Power and Infrastructure Board (PPIB) for implementation of seven hydroelectric power projects has been overwhelming.
These raw-site projects, mainly large-scale, are to be implemented in private sector, on international competitive bidding (ICB) basis, to be located in the NWFP and Azad Jammu & Kashmir (AJK).
As many as 29 prospective investors have submitted detailed proposals, which include, besides national companies, a host of investors from the USA, UK, Canada, UAE and China.
These projects are: 655 MW capacity Suki Kanari hydel power project proposed to be located on the Kunhar river near Kaghan district Mansehra, 458 MW capacity Karrang hydel power project proposed to be set up in district Kohistan, 148 MW capacity Madyan hydel power project to be located on the Swat river, 130 MW capacity Patrind hydel power project on the Kunhar river in district Mansehra, 115 MW capacity Sharmai hydel power project to be installed in district Dir, 245 MW capacity Mahl hydel power project proposed on Jhelum river to be located near Kohala, AJK, and 53 MW capacity Harighel hydel power project to be established near Bagh, AJK.
The proposals received from prospective investors are currently being evaluated by the PPIB for pre-qualification in conformity with the laid down procedure and criterion.
It is expected that subsequently ranking of companies will be done for each project as per ranking criteria, and the Letter of Interest (LOI) would be issued to the selected ones by September/October 2005, in accordance with the Power Policy 2002 framework.
This is for the first time that proposals for implementing hydel power projects have been invited under the Power Policy 2002. Earlier, the PPIB has processed a number of hydel power projects under Hydel Policy of 1995. In fact the LOIs for 41 projects were issued and eventually the LOSs (Letter of Support) were issued for 13 projects, of a cumulative capacity of 354 MW - four in the NWFP, five in the AJK and another four in Punjab.
Since its inception in 1994, the PPIB has successfully implemented more than 15 private sector power projects with a cumulative capacity of 5,577 MW, transforming the erstwhile government-monopolised power sector into a vibrant private-sector-led activity through introducing the IPPs (Independent Power Producers).
Incidentally, all these projects are thermal oil-based and gas-based power plants and not a single hydropower project could be executed so far. In all, proposals for setting up 39 hydel projects-varying from 10 MW to 960 MW capacity - have been entertained by the PPIB, at different times, from private sector on Build-Own-Operate-Transfer (BOOT) basis.
The major projects include New Bong Escape hydropower project of 97 MW capacity, to be located about 7-1/2 km downstream of Mangla Dam, Kohala project of 600/740 MW and Abbasian project of 245 MW capacity, both proposed on the Jhelum river, Taunsa Barrage project of 120 MW on Indus river and Matiltan project to be located in district Swat having a capacity of 84 MW.
New Bong Escape Hydropower is the most promising project that may come up as the first hydropower IPP in the country. It is a run-of-the-river, low head project, now scheduled to achieve financial close by October 2005. Its sponsors, Laraib Energy Ltd, have experienced tremendous difficulties in taking their project finally to this stage.
They have been seriously working on this project since 1996 when the initial project study was carried out. But it was only sometime in 2002 that a revised bankable feasibility report was prepared and approved.
The Power Purchase Agreement (PPA), though initialled in March 2003, was signed with WAPDA's NTDC (National Transmission and Dispatch Company) in April 2004, along with Implementation Agreement (IA) and Water Use Agreement (WUA) that had been initialled in December 2003.
The project is expected to go for commercial operations within 36-42 months counting from financial close, that is, earliest by December 2008, whereas it was to commission by December 2005 according to last estimates. One may imagine colossal loss the nation suffered on account of inordinate delay in implementing only this project-concurrent loss of net 426 million kWh of electricity per year, and that too, relatively inexpensive electricity compared to thermal power generation. Position with regard to other hydel power projects is not different either.
Balloki-Sulemanki Link (Tail) Canal hydropower project of 10 MW capacity is proposed to be located near Basirpur, district Okara. This project was scheduled to achieve financial close by September 1998, but still there are no signs of achieving the milestone, even after a lapse of seven years of having initiated negotiations for power purchase.
The sponsors, which include Shaukat Hydropower Ltd along with Multihydro Inc of Canada, are left high and dry after having initialled years ago the IA and WUL with the concerned authorities. Likewise, the 84-MW Matiltan Project, proposed to be located on Ushu river, district Swat, was expected to be on stream by December 2005, but physical work has not yet been undertaken. Power Policy 2002 had envisaged commissioning of a total of 9 hydroelectric power projects, in private as well as in public sector, with a cumulative capacity of 792 MW, during the Five-year Short-term Plan. New Bong Escape, Malakand-III (81 MW) and Jinnah (on Indus river) of 96 MW capacity were scheduled for commissioning by December 2005.
However, construction only on one scheme, Malakand-III project in the NWFP, has been undertaken by SHYDO (Sarhad Hydel Development Organisation). It is not possible to commission the plant by December this year, which would be delayed minimum by about a year.
Another project of SHYDO, Pehur High Level Canal project of 12 MW capacity, was to commission by December 2004. There is no physical progress on the project, as the Government of the NWFP has not taken a decision to select EPC (Engineering, Procurement and Construction) contractor as yet. Likewise, WAPDA's five projects namely Allai Khwar (121 MW), Duber Khwar (130 MW), Khan Khwar (72MW), Jinnah (96 MW) and Golan Gol (MW) were to be commissioned by June 2006.
While engineering, design and preliminary site work has commenced by the contractors/WAPDA on the three Khwar projects, these are not expected to complete on schedule. Likewise, the financial close of Jinnah project is awaited since long, while the fate of Golan Gol project is still uncertain. And there is no news about status of Mithankot (Punjab) project of 100 MW capacity that envisaged commissioning by June 2007.
Currently, detailed feasibility studies are in advanced stage for many hydel power projects, under the supervision of the PPIB, that are covered under the medium and long term plans as mentioned in the Power Policy 2002 document. These reports were completed, in May 2005, for two hydel power projects in the AJK; Rajdhani project of 132 MW capacity at Mangla and Kotli project of 97 MW at Kotli, which were approved earlier as per Hydel Policy 1995.
Sponsors of the Kotli project are expected to commence negotiations for power purchase in August 2005. Preparation of feasibility studies is in progress for Munda Dam project of 740 MW power generation capacity, Gabral-Kalam hydel project of 101 MW, both proposed to be located in Swat.
All the four projects are now scheduled to go on stream in the year 2009. However, the sponsors of Gulpur (Poonch, AJK) project of 60 MW capacity are to finalise project feasibility report by April 2007. It is intriguing to observe that even WAPDA, with all its financial, technical and human resources, is unable to achieve major progress and adhere to completion schedules on its above-mentioned hydel power projects that are covered under its over-publicised Vision 2025.
One wonders if it is part of the plan to deny access of inexpensive electricity to the common man, and let the poverty rate grow manifold in the country in coming years. As a natural course, the gas-based and oil-based power plants would need to be installed instead to meet the growing power demand. And that is exactly what is being done, much to the concern of all that are required to pay ever-increasing electricity tariff.
Looking at the issue professionally, however, it is noted that there was lack of commitment neither on the part of government agencies nor the investors, but the absence of realisation of technical and economic challenges that a hydel power scheme poses to the investor and developer under particular local conditions. In Pakistan, major hydel resources/sites are mainly located in the north, in the NWFP and Azad Jammu & Kashmir, primarily high head, run-of-river sites, with some as peak storage projects, whereas potential for small projects exists in the Northern Areas.
These are far-flung and isolated areas, in high-altitude mountains, lacking basic infrastructural facilities required to develop such projects. Road conditions are poor, as mostly non-metal and jeep-able roads exist that are unable to transport machinery and equipment. Even at some locations the sites are not accessible.
There are other communication and logistic problems and limitations too, such as non-availability of labour, housing and open land for project as well as construction. Extreme weather conditions prevail in these areas. All these factors impede construction activities for the project, resulting in high capital cost and long construction time.
But the most important and strategic factor is that of the project feasibility. Though hydel potential is identified to an additional 41,723 MW, there are hardly any detailed feasibility studies carried out for the schemes. Generally, these are just preliminary studies, not even pre-feasibility studies, which are based on reconnaissance data only for river flow. Detailed studies of topography, hydrology, site geology and engineering geological conditions are the basic ingredients to determine feasibility, or otherwise, of any hydroelectric power scheme.
The raw-site projects thus mean that the respective feasibility studies have not been conducted. Unfortunately, availability of reliable historical data, which include daily discharge, flood discharge over a period of years, volume of sediment carried by the river, etc, remains questionable in most of the cases.
Compliance of environmental requirements and resettlement are also of prime importance. Every hydel project is tailor-made, sometimes involving complex construction. For example, Karrang project (458 MW) entails an underground powerhouse and Neelum-Jhelum project (969 MW) requires a 35-km tunnel underwater.
The design, engineering and construction of the project thus require special technology and expertise. Undertaking detailed site investigations and preparing a bankable feasibility report of international standard requires placing substantial capital and other resources at risk.
All this investment is made without any guarantee that the project, if implemented, would meet commercial viability. Developing infrastructure and arranging for land lease could be expensive, time consuming and involving risks, giving nightmares at times to the investor.
WAPDA has faced difficulties in obtaining land lease for the on-going Khwar series projects located in Kohistan and Mansehra districts, resulting in delays in the construction of basic amenities for the contractors. These factors ultimately result in delays and cost overrun, besides the generation, and thus revenue, losses.
A typical example is cited that of implementation of various extension projects undertaken by the WAPDA at Mangla and Tarbela hydroelectric power stations. Whereas all basic infrastructure and major civil structures existed at the time of launching an extension project, yet most of these projects were delayed due to technical problems and force majeure, resulting in time and cost overruns and generation losses.
Had these projects been executed in the private sector, the sponsors would have suffered considerable financial loss, even to consider abandoning the project. Similar scenario was observed in case of construction and commissioning of Ghazi Barotha, Chashma and Jagran hydel projects, which were delayed due to a number of factors.
From the viewpoint of the investor, it is therefore vitally important that the related issues are addressed taking him into confidence, and the risks involved, as outlined above, are properly assessed and shared among various parties/stakeholders proportionately. For instance, the government may conduct detailed investigations and prepare feasibility studies for large-size hydel projects.
It will be attractive for the investor if the term of the PPA is increased from the present 25-30 years to 40-50 years with a view to bring the levelized tariff to more acceptable level. There has to be some special fiscal and financial incentives too for setting up hydel power projects in private sector, and the processing time curtailed for signing the security package documents and approval of tariff by National Electric Power Regulatory Authority (NEPRA).
The lowest tariff for the hydel power projects will be determined on the basis of ICB. In case the government adopts such measures, only then the hydel power projects would be implemented in the real earnest, providing greater benefit to the nation.
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