POWER SECTOR AN OVERVIEW October 2012 Demand
Why Power? 1. Manufacturing companies need it to operate plant and machines 2. Service companies need it to operate technology 3. Agriculture needs it for tube wells 4. Domestic Consumers need it for a Hassle free life If all of the above are getting the required power, economy can proceed with other basic &developmental l activities in the country. Demand
Evolution Electricity & Gas Distribution (al Share in GDP) % 4.5 4.0 35 3.5 3.0 2.5 2.0 1.5 10 1.0 0.5 - Electricity & Gas Distribution FY00 FY05 FY09 FY10 FY11 FY12 3.9 3.2 2.5 2.8 2.2 2.18 Declining trend in share of utilities (reduction in supply of energy) in GDP. Significant impact on GDP The cost of supply deficit/reduction to the economy is ~PKR380bn (~2% of GDP) [Economic Survey of Pakistan]. Demand
Largely a single buyer model - Generation Transmission Distribution Consumption Furnance Oil Independent Power FESCO Thermal Gas Plants, Generations GEPCO Domestic Coal Companies, and HESCO KESC National IESCO Industrial Hydel Water Dams Transmission and LESCO Solar Distribution ib i Company MEPCO Commercial Renewable Independent Power Wind PESCO Plants Hydel IPPs QESCO Others KESC TESCO KESC Demand
Key Participants in Pakistan WAPDA, IPPs, RPPs, and GENCOs sell electricity to the central power purchasing agency (CPPA) National Transmission and Despatch hcompany KESC is the only vertically integrated company in Pakistan. It has its own generation plants and to meet the demand of its coverage area mainly Karachi, KESC buys electricity from NTDC NTDC, through CPPA, transmits the electricity to distribution companies (DISCOs). DISCOs Peshawar, Islamabad, Lahore, Multan, Quetta, Hyderabad, Gujranwala, and Sarhad Electric Supply companies. Electricity is then sold to final customer. Demand
Regulatory Framework The Regulator: National Electric Power Regulatory Authority [NEPRA]: 1. Issues Licenses for generation, transmission and distribution of electric power 2. Establishes and enforces Standards to ensure quality and safety of operation and supply of electric power to consumers 3. Approves investment and power acquisition programs of the utility companies 4. Determines Tariffs for generation, transmission and distribution of electric power. Demand [Pakistan]
Power of World in the World of Power 1990 : 11,822 TWh 2010 : 20,629 TWh 37% 15% 11% 41% 21% 5% 17% 18% <1% 13% 16% 2% <1% <1% 1% <1% <1% 1% Increased reliance on coal and gas Increased focus on solar and wind decreased reliance on hydel and oil Demand
Power of World in the World of Power 30,000 Electricity it demand d in the world Projections 26,503 TWh 25,000 20,000 TWh 15,000 10,000 5,000 0 Expected Generation Mix 2020 Fuel / Growth Low High Coal 36.6 19.6 Gas 20.5 20.5 2010 2020 Oil 24 2.4 13 1.3 Low growth scenario Nuclear 14.5 18.4 Hydro 16.8 18.7 Wind 5.2 11.0 Solar 12 1.2 45 4.5 Geothermal 0.5 1.0 Other 2.2 5.1 Total TWh 26,503 30,392 Demand
Power of World in the World of Power World [TWH] Pakistan 2008 2009 2010 2011 2012 Generation (TWH) 18,960 19,020 19,250 19,120120 20,250250 Consumption (TWH) 16,880 17,480 17,930 17,780 19,090 Per Capita consumption (KWH) 2,517 2,574 2,649 2,566 2,719 Losses -11% -8% -7% -7% -6% 2011 Generation (GWH) 102,484 Consumption (GWH) 76,285 Per Capita consumption (KWH) 431 Losses -26% Pakistan s s per capita consumption is ~6x lower than world average Demand
Electricity Generation in Pakistan Generation Capacity (MWH) 2012 Installed % of total GENCOs 4,885 20.7% KESC 2,050 8.7% Thermal IPPs 8,587 36.3% RPPs 453 1.9% Others (CPPs/SPPs) 324 1.4% WAPDA 6,444 27.3% Hydel IPPs 111 0.5% Nuclear Two Nuclear plants 787 3.3% Import Mainly from Iran - 0.0% Total 23,641 100% MWH Comparison of Installed Capacity and Generation of Electricity 25,000 Hydel - 2008 2009 2010 2011 2012 Nuclear 4.9% Capacity in 20,000 15,000 10,000 5,000 Installed Capacity 20,232 20,556 21,614 23,412 23,641 Generation 11,125 10,806 11,399 11,699 11,158 Units Generated during the year 97,451 94,663 99,856 102,484 97,745 Electricity Generation by sector players (including Imports) Source wise electricity generation during FY12 during FY12 Others Import (Iran) Mixed Import 0.3% 0.8% 0.3% 1.7% Wind 0.0% GENCOs 13.5% 125,000 100,000 75,000 50,000 25,000 - illions Units in Mi Gas 26.2% Hydel 31.9% WAPDA 30.7% KESC 8.6% RFO 34.1% Coal 0.1% HSD 1.6% IPPs 45% Demand
Electricity Consumption in Pakistan Segment wise Electricity Consumption Public Light Bulk Supply 06% 0.6% 46% 4.6% Agriculture 11.8% Others 1.6% Commercial 7.5% Domestic 46.2% Industrial 27.7% Demand
Demand Supply Gap [Going forward] Power Generation Projects in Pipeline No Capacity Expected Cost Per MW Public US$ Hydel 12 2,358 96,282 40.8 Private Oil Based 8 997 1,151 1.2 Pipeline Quality Gas 1 140 140 10 1.0 Dedicated Gas fields 3 621 780 1.3 Hydel 16 5,271 10,096 1.9 Coal 7 1,725 2,356 1.4 Naphta 2 404 404 10 1.0 37 9,158 111,209 12.1 Deficit in Demand (MWh) FY13 FY14 FY15 Planned Generation Capability 21,746 24,212 25,081 Projected Demand Growth Rate 8% 7% 7% Projected Demand Growth Rate 25,284 27,092 29,032 Deficit (3,538) (2,880) (3,951) Demand
Business Risk Assessment 1. Demand Supply Gap [Supply in Deficit] 2. Lifecycle [Growth] 3. Competitiveness [Low Buyer Power ; Low Supplier Power] 4. Significance to suppliers [High] Power Deficit in Pakistan 30,000 25,000 20,000 15,000 10,000 5000 5,000 - (5,000) (10,000) 2008 2009 2010 2011 Generation Capability 14,707 16,040 15,144 15,430 Demand during Peak Hours 19,281 20,314 21,029 21,086 MW WH Deficit (4,574) (4,274) (5,885) (5,656) Deficit % Max Demand 24% 21% 28% 27% 30% 25% 20% 15% 10% 5% 0% -5% -10% 2011 Consumption of country Consumption of % of total country consumption Electricity generated (MWH) Consumption of Fuel per MW of Electrcity High Speed Diesal (tonnes) 6,700,436 99,847 1% 358,466 18.69 Furnance Oil (tonnes) 8,921,327 8,038,924 90% 35,846,642 0.249 Natural and Low BTU Gas 1,240,671 366,906 30% 29,118,000 0.043 (mln cubic feet) Coal (Tonnes) 7717149 96,488 1% 131,000 58.91 Oil, Gas, Coal (TOE) 50,162,164 15,082,791 30% 65,454,108 0.230 Demand
Business Risk Key Performance Indicators 1. Generation Efficiency 2. Transmission i & Distribution ib i losses 3. Recovery of bills/receivables 2011 Units Purchased Units Sold/Billed Dist Losses Amount Lost Billed Realized (PKR mln) (PKR mln) (PKR mln) Recovery Ratio PESCO 13396 8,712-35% (37,133) 69,065 54,146 78.4% IESCO 8502 7,674-10% (7,231) 67,015 62,580 93.4% GEPCO 7314 6,439-12% (7,625) 56,111 55,459 98.8% LESCO 16995 14,741-13% (21,178) 138,501 135,872 98.1% FESCO 9685 8,596-11% (9,411) 74,289 74,111 99.8% MEPCO 12471 10,189-18% (18,956) 84,637 82,922 98.0% HESCO 8784 5814 5,814-34% (27,229) 229) 53,302302 31,501 59.1% QESCO 5084 4,048-20% (7,998) 31,250 12,810 41.0% KESC 15433 10,072-35% (56,961) 107,016 91,559 85.6% 97,664 76,285-22% (188,211) 681,186 600,960 88.2% Demand
[Inter-corporate debt & Subsidy] Inter-Corporate t Chain of DEBTS Receivable from Consumers End Consumer DISCOs, KESC Payable to DISCOs, KESC Payable to NTDC Low Recoveries Losses Subsidy Receivable from DISCOs, KESC NTDC, KESC Payable to IPPs, GENCOs Receivable from NTDC IPPs, GENCOs Payable to Fuel Suppliers Receivable from IPPs, GENCOs, KESC Fuel Suppliers Payable to E&P Companies Receivable from Fuel Suppliers E&P Companies 2006-0707 2007-0808 2008-0909 2009-20102010 2010-20112011 Tariff Determined by NEPRA (Rs./kwh) 4.73 5.77 8.63 8.63 8.95 Tariff Notified by GOP (Rs./kwh) 4.43 4.74 5.52 5.57 7.33 Subsidy Rs./kWh) 0.30 1.02 3.11 3.06 1.62 Demand
[Key Performance Indicators] 1. Working Capital Management 2. Debt Repayment Behavior 3. T&D Losses Demand
What s the outlook NEGATIVE Business Risk: Generation Segment: low. Transmission and Distribution Segment: medium. : Generation, Transmission and Distribution Segment: medium to high Demand
Bibliography 1. Pakistan Economic Survey 2011-12: Chapter 1 Growth and Stabilization Table 1.5: al Share in Gross Domestic Product (GDP) 2. Pakistan Economic Survey 2011-12: Chapter 14 Energy 3. National Electric Power Regulatory Authority (NEPRA) : www.nepra.org.pk 4. Water and Power Regulatory Authority (WAPDA) : www.wapda.gov.pk 5. Pakistan Electric Power Company (PEPCO): www.pepco.gov.pk 6. National Transmission and Despatch Company (NTDC) : www.ntdc.com.pk 7. State of Industry Report 2010-2011 : http://www.nepra.org.pk/industryreports.htm 9. Wärtsilä Corporation : http://www.wartsila.com 10. Private Power and Infrastructure Board (PPIB) : www.ppib.gov.pk 11. Pakistan Economic Survey 2011-12: Chapter 12 Population Labour Force and Employment Table 12.1: Selected Demographic Indicators 12. Central Intelligence Agency World Fact Book https://www.cia.gov/library/publications/the-worldfactbook/ 13. Pakistan Energy Year Book : 2010-2011 14. Note : All year wise Electricity Statistics of Pakistan relate to Fiscal Year (which starts from Jul and ends in Jun)
Analysts Rana Muhammad Nadeem Samiya Mukhtar Naureen Hyat Arslan Rafique nadeem@pacra.com samiya@pacra.com naureen.hyat@pacra.com arslan.rafique@pacra.com Contact number: +92 42 3586 9504 DISCLAIMER PACRA has used due care in preparation of this document. Our information has been obtained from sources we consider to be reliable but its accuracy or completeness is not guaranteed. The information in this document may be copied or otherwise reproduced, in whole or in part, provided d the source is duly acknowledged. d The presentation tti should not be relied upon as professional advice.