ISLAMABAD: The Asian Development Bank (ADB) has pointed out implementation challenges in NTDC projects, which are posing risks for future projects worth billions of dollar, particularly in terms of procurement delays, well-informed sources in the ADB told Business Recorder.
The ADB’s consultation mission for the Distribution Sector Investment Project and Energy Sector Investment Program visited Pakistan from April-15-26, 2024. The Mission comprised of Seung Duck Kim, Principal Energy Specialist (Mission Leader), Ehtisham Khattak, Senior Project Officer (co-lead), Nurlan Djenchuraev, Principal Environmental Specialist, Jose Tiburcio Nicolas, Principal Social Development Specialist, Keiko Koiso, Senior Procurement Specialist; and Habib Hasan, Associate Project Analyst, under the guidance of Noonho Hwang Director, Energy Sector Group.
The mission visited Karachi and Islamabad to discuss with the government, the Power Planning and Monitoring Company (PPMC), the Hyderabad Electric Supply Company (HESCO), the Sukkur Electric Power Company (SEPCO), the Multan Electric Power Company (MEPCO), and the Lahore Electric Supply Company (LESCO), the ADB’s support for the distribution sector investment project, namely, the Power Distribution Strengthening Project.
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As part of ADB’s country programming mission, the Mission undertook a series of consultation meetings with the Ministry of Finance & Revenue, and the Energy Department, the government of Punjab and Sindh.
The Mission held extensive discussions with the senior officials from the Ministry of Energy (Power Division), the Ministry of Economic Affairs, PPMC, HESCO, LESCO, MEPCO and SEPCO. Wrap-up meetings were held separately with the Ministry of Energy and with Ministry of Economic Affairs to confirm the Government’s commitment to the agreed actions.
The aide memoire summarizes the key agreements which are subject to approval of the Government and ADB. The Bank has requested the Government’s confirmation of the mission’s findings and the aide memoire, latest by May 15, 2024.
Power Distribution Strengthening Project: The mission met with the Ministry of Energy to finalize the project scope, and the MoE shared the following guidelines for the Mission to consider when finalizing the project scope with DISCOs: (i) the revenue protection measures, including the Asset Performance Monitoring System (APMS) and the Automatic Meter Reading (ARM)/Advanced Metering Infrastructure (AMI), are the government’s investment priorities; (ii) locally available transformers should be procured by DISCOs using their own resources, and ADB’s foreign currency loan should be utilized to procure imported equipment; and (iii) funding allocation for the Secondary Transmission System (STG) should be optimized to support the procurement of internationally sourced equipment.
PESCO’s experience: The mission met with PESCO to learn lessons from its early work in rolling out APMS, aerial bundled cable (ABC cables), and AMI/AMR. The Mission has drawn following lessons to incorporate in the project design: (i) APMS was proven generally efficient in improving the Aggregate Technical & Commercial (AT&C) loss in the installed areas by reducing the number of outages and downtime (in return, increasing revenues). APMS provides real-time digital information on the asset status for PESCO, aiding in the operation and maintenance of the asset by PESCO; (ii) in some cases, especially in the low-income areas, APMS alone was found to be ineffective due to the failure of billing payment by the low-income households, suggesting affordability of electricity also matter; (iii)P PESCO’s APMS and metering information and data are fed into the central system of the Power Information Technology Company (PITC), and PESCO indirectly gathers data from PITC. Given the growing number of connections points and amount of data to process, designated data centers will be required in PESCO with protocols to protect the consumers’ information and ensure cyber security.
According to the bank, in consultation with the MoE and DISCOs, the Mission agreed on scope of work. For LESCO, the STG work will be limited to the supply of critical imported equipment to complete the construction and/or rehabilitation of grid stations.
To this end, the ADB will conduct due diligence on the land titles to ensure no emergency provisions have been exercised in the land acquisition process. In the case of HESCO, the ADB will consider financing the conversion of grid stations and associated transmission line strengthening only when right-of-way issues are clear.
Further due diligence is necessary to refine the scope for HESCO. For APMS/AMR/AMI, the ADB will assess the adequacy of the data management and processing capacity of DISCOs and propose work to improve the date centres, as necessary. The project will include soft components to governance, project management and gender inclusiveness of DISCOs.
PC-1 approval: Based on the scope the consultant team, MRC will prepare feasibility studies and the mission will conduct the project costing with the assistance of the consultant team and DISCOs, targeting a loan amount of $ 200 million. The EAD has specifically requested the Mission to expedite the approval process and ensure early disbursement of the loan amount. The Mission underscored that PC-1 approvals is critical path to achieving loan approval within the calendar year of 2024 and has requested the full support of DISCOs for the earliest possible PC-1 approval.
Overall project approval schedule: The Mission has proposed the following milestones to achieve ADB board approval of the project within the calendar year of 2024. Given the tight schedule, the mission has requested the support of the MoE, PPMC and DISCOs to meet all milestones in a timely manner, ie, approval of PC-1, June 2024, ADB (pre) fact-finding mission - July/August 2024, clearance of all safeguard documents – August 2024, the ADB management approval – October 2024, loan negotiation - Oct/Nov 2024 and the ADB Board consideration.
Capacity Building and Technical Assistance Support. In addition to the MoE’s earlier request for ADB intervention in the distribution-level SCADA system, LESCO has also requested the ADB support to study a strategic plan for the SCADA system and reactive power management. The Mission informed that ADB team is in the process of securing funding sources for the proposed assistance.
Separately, the Mission will propose various capacity-building programs for DISCOS to ensure that their project implementation capacity is built before the commencement of the project. As a first step, the Mission has invited the representatives from the MoE and DISCOS to the ADB’s flagship event, the Asia Clean Energy Forum, 2024, to be held in Manila in early June 2024. The Mission followed up on the nominations to ensure the timely processing of visas and traveling arrangements.
Power Transmission Investment Program (NTDC): the government requested funding from the ADB for critical power sector projects through a letter of April 15, 2024.
The Mission met with the MoE and conveyed ADB’s intention to support NTDC’s priority projects in consideration that those projects will contribute to the export of the renewable energy power and improve the system reliability.
In response, the MoE requested prioritization of two 500 kV South to North transmission line projects, especially, Matiari - Moro - Rahim Yar Khan line, to alleviate the transmission bottleneck and enable the export of the renewable energy-based electricity from the South to the Central and Northern load centers.
The mission requested available information on the projects, including feasibility studies, which NTDC will share once available on: (i) 500 kV double circuit transmission line from Ghazi Barotha to Faisalabad West (270 kms)- $ 349 million; (ii) 500 kV double circuit transmission line from Matiari-Moro- Rahim Yar (490 kms) -$ 675 million; (iii) reactive compensation device - $ 350 million; and (iv) Battery Energy Storage System (BESS) for frequency regulations -$ 300 million. Matiari - Moro - Rahim Yar Khan Line: Given the significant funding requirements and challenges in land acquisition as well as the need to complete the feasibility study and due diligence works to confirm the project scope and readiness, the Mission believes the Matiari Moro - Rahim Yar Khan line may require sectionalization and/or phased development. This effort can be complemented by installing reactive compensation devices to manage the power quality issues.
The Mission also informed that ADB is in the process of including a transmission investment program for 2025 in its investment pipeline, 2025-27, with an indicative amount of $300 million.
The mission highlighted the implementation challenges in ongoing NTDC projects, which pose risks for future projects, particularly in terms of procurement delays. In recognition of the various challenges in NTDC, the MOE has shared its visions for the forthcoming NTDC restructuring. This includes carving out a new, lean entity especially for the development and implementation of investment projects.
The Mission appreciated the government’s initiative on NTDC restructuring currently underway. The mission had preliminary discussions on procurement issues with the MoE and informed that an ADB mission will be fielded in the coming weeks to discuss NTDC projects with the MoE.
Second Access to Clean Energy Investment Program (Punjab and Sindh Government): The mission met the Punjab and Sindh Energy departments to discuss ADB support for the respective governments. The mission informed that the ADB will include an investment program for 2025 approval, aiming to provide access to the clean and affordable energy solutions in the underserved areas of Punjab and Sindh.
An initial amount of $200 million has been earmarked to cover both the Punjab and Sindh Governments. Through previous interactions with the Punjab Energy Department, the Mission confirmed strong interest of the Punjab Government in upscaling and expanding the first phase of the Access to Clean Energy Investment Program. The Mission shared a draft Term of Reference (ToR) for consultancy work for the Punjab Government’s for their review and comments.
The Sindh Energy Department has requested ADB support in priority areas identified by the Sindh Government: (i) mini-grid solutions for rural underserved areas; (ii) a new solarization initiative aimed at bringing electricity to the remotest and most underprivileged regions of Sindh; and (iii) solarization of reconstructed houses in flood-affected areas. The nature of the Sindh Government’s request aligns well with the objectives of the Second Access to Clean Energy Investment Program. The Mission and the Sindh Energy Department have agreed to pursue the program, including the development of sustainable business models. In this light, the Mission also shared a draft ToR for consultancy work for the Sindh government’s review and comments.
The mission also noted the MoE’s concerns regarding the increasing net- metering projects and their potential impact on DISCOS. Although the proposed program will primarily focus on off-grid areas, the mission will consult with the MoE as the program preparation progresses.
Copyright Business Recorder, 2024