ISLAMABAD: The World Bank is said to have shown its reluctance to finance Asset Performance Management System (APMS) with the point of view that the bank is engaged in Private Sector Participation (PSP) of Discos which would bring sufficient investment to improve the sector, well-informed sources told Business Recorder.
This message has been conveyed by the World Bank’s Country Director to Secretary Economic Affairs Division (EAD) who had requested the bank to finance the APMS project of the government. Appreciating the government for the initiative to bring more transparency, reliability and reduce losses through digitization and automation, the Bank’s Country Director has stated that the bank is engaged with the three electricity Distribution Companies (DISCOs), namely Hyderabad Electric Supply Company (HESCO), Multan Electric Power Company (MEPCO) and Peshawar Electric Supply Company (PESCO) through an ongoing Electricity Distribution Efficiency Improvement Project (EDEIP) which was approved by Bank’s Board in December 2021.
According to him, while relatively slow moving (less than 5 percent disbursed) the EDEIP project includes the installation of APMS/Transformer Monitoring System (TMS) in all the DISCOs. MEPCO has already invited bids for installation of TMS on 9,000 of their 100 kVA and 200 kVA distribution transformers while PESCO and HESCO will also be initiating their procurement to install TMS in two of their high revenue high loss Circles.
At the same time, the World Bank and IFC teams have been in active discussions with Power Division and Privatization Commission on introducing Private Sector Participation (PSP) in the distribution sector, given the urgent need for investments and improve efficiency.
“Any PSP model adopted will bring the much needed investments to strengthen the sector, reduce the losses, and improve performance,” Najy Binhassine said, in his letter to Secretary EAD, Kazim Niaz.
He was of the view that due to existing situation, it is critical to first observe the successful implementation of the APMS though the ongoing interventions under EDEIP as well as progress made under the PSP efforts.
“Any future financing support would be considered in this context and depend upon the availability of financing. This approach would allow us to optimize the impact of future investments and mitigate risks of delays,” he maintained.
Najy has further stated that the Bank is committed to exploring opportunities that will bring improvement in the electricity distribution sector.
According to the Bank, introducing Public Sector Partnership (PSP) in the Discos does fall within this scope and overall project development objectives, and the technical assistance funding under this project can therefore be used for these purposes. In addition, the Bank team has already engaged a number of international and national experts to commence the work on the areas listed in the EAD’s letter (i.e.; the prerequisites for engaging private investors).
The Country Director World Bank argued that one of the tasks critical for the successful completion of all the prerequisites, is finalisation of the Terms of Reference for the Transaction Advisor (TA), as well as, initiation of the hiring process. This task is to be undertaken by the Privatisation Commission (PC).
In the action plan, the TA needs to be onboard by September 2024 to meet the timeline for issuance of the first Request for Proposal (RFP) by May 2025. Therefore, the approval of the Terms of Reference (ToR), budget, and financing source for the TA, including hiring of the TA, is on the critical path.
As such, the presence of the PC in working jointly with PD and World Bank team to finalise the ToRs and the steps highlighted is essential, he said adding that the Bank is ready to discuss various financing instruments and resources to continue supporting downstream implementation of this initiative as Discos’ performance has been one of the key contributors to the growing circular debt in the power sector.
Earlier, Secretary EAD had approached the World Bank for Non-Lending Technical Assistance (NLTA) to facilitate private sector participation in the privatisation of power Distribution companies.
EAD conveyed to the Bank that the Ministry of Energy (Power Division) intends to avail WB’s support under Non Lending Technical Assistance for carrying out the following broad activities to facilitate private sector participation in the Discos: (i) draft guidelines for private sector participation in Discos and the competitive process for inviting the private investors/ operators; (ii) sector financial sustainability and sensitivity analysis including development of sector financial model, framework on uniform tariffs for Discos, management of Discos’ liabilities and subsidy management procedure; (iii) updating licensing eligibility criteria and rules for distribution and for supplier of last resort; (iv) developing a communication strategy and implementation action plan; (v) developing/ proposing HR strategy and action plan for implementation; and (vi) assessment of impact of market evolution on private sector participation in Discos.
EAD has asked World Bank to consider the request of Ministry of Energy (Power Division) and indicate its commitment to support the proposal under NLTA.
Recently, a high level meeting presided over by Prime Minister Shehbaz Sharif decided to privatise certain power distribution companies.
In Phase-I, IESCO, GEPCO, and FESCO will be fully privatised, followed by LESCO, MEPCO, and HAZECO in Phase-II. SEPCO, HESCO, and PESCO will be offered long-term concession agreements to the private sector, while TESCO and QESCO will remain under government control due to their unique conditions.
The Privatisation Commission has been directed to hire a transaction advisor and complete necessary formalities to finalise Phase-I transactions by January 2026. The Power Division will engage a technical advisor to review the regulatory and policy framework for the privatisation and outsourcing of Discos.
Copyright Business Recorder, 2024
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