Identifier
Created
Classification
Origin
08ISLAMABAD1623
2008-04-21 10:04:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Islamabad
Cable title:
NAVIGATING THE MAZE OF PAKISTANI ENERGY POLICY- PART ONE
how-toVZCZCXRO3172 RR RUEHLH RUEHPW DE RUEHIL #1623/01 1121004 ZNR UUUUU ZZH R 211004Z APR 08 FM AMEMBASSY ISLAMABAD TO RUEHC/SECSTATE WASHDC 6591 INFO RUEATRS/DEPT OF TREASURY WASHDC RUCPDOC/USDOC WASHDC RHEBAAA/DEPT OF ENERGY WASHDC RUEHRC/USDA FAS WASHDC 4183 RUEHNE/AMEMBASSY NEW DELHI 3146 RUEHLO/AMEMBASSY LONDON 7745 RUEHML/AMEMBASSY MANILA 2969 RUEHKP/AMCONSUL KARACHI 9591 RUEHLH/AMCONSUL LAHORE 5342 RUEHPW/AMCONSUL PESHAWAR 4075 RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL RHMFISS/CDR USCENTCOM MACDILL AFB FL
UNCLAS SECTION 01 OF 05 ISLAMABAD 001623
SIPDIS
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ENGY EFIN ECON EINV PREL PK
SUBJECT: NAVIGATING THE MAZE OF PAKISTANI ENERGY POLICY- PART ONE
REFS: A) Islamabad 00655 B) Islamabad 00810 C) Islamabad 00921 D)
Islamabad 01420 E) Karachi 199
UNCLAS SECTION 01 OF 05 ISLAMABAD 001623
SIPDIS
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ENGY EFIN ECON EINV PREL PK
SUBJECT: NAVIGATING THE MAZE OF PAKISTANI ENERGY POLICY- PART ONE
REFS: A) Islamabad 00655 B) Islamabad 00810 C) Islamabad 00921 D)
Islamabad 01420 E) Karachi 199
1. (SBU) SUMMARY: Pakistan's energy crisis has the potential to slow
down economic growth and create law and order problems. With
massive blackouts affecting every region and every demographic,
energy policy and shortages are daily front page news. Not a single
mega-watt of electricity has been added to Pakistan's national grid
since 2000 despite record breaking economic growth and population
expansion. With economic and manufacturing capacity slumping due to
power outages, unemployment is increasing while tempers and
temperatures are rising. Complicating the situation is the complex
maze of GOP policy makers who cannot coordinate Pakistan's energy
policy due to overlapping and contradictory authorities. As a
reference for USG efforts in providing aid to Pakistan's energy
sector, the following serves as a roadmap of GOP energy policy
making bodies and entities. END SUMMARY.
2. (SBU) This three part cable reviews the haphazard mix of
horizontally and vertically placed institutions which comprise the
energy policy making sector of Pakistan. Part one explains the
Ministry of Water and Power and its 19 subordinate agencies involved
with electricity. Part two, in "Navigating the Energy Maze," will
address the Ministry of Petroleum and National Resources and the 16
subordinate agencies. Part three will address the other 4
Ministries and 7 other agencies involved in and at various levels of
the GOP energy policy process. A lack of coordination and absence
of any clear line of authority hampers any formulation of policy
efforts to address the current energy crisis in Pakistan.
3. (SBU) This is a continuation of cables on Pakistan's energy
sector.
--------------
A SIMPLIFIED OVERVIEW
--------------
4. (SBU) The lead line agency in government for the electric power
sector is the Ministry of Water and Power. However, the Ministry of
Petroleum and Natural Resources controls fuel supplies; the Finance
Ministry holds the purse strings; the Planning Commission manages
the investment approval process; and National Electric Power
Regulatory Authority (NEPRA) regulates companies operating in the
power sector. These operating companies include the Water and Power
Development Authority (WAPDA),owner of the public sector hydro
power plants, and the Pakistan Electric Power Company (PEPCO),the
holding company for WAPDA.
5. (SBU) PEPCO includes three power generating companies (GENCOS),
in the south, center and north; the National Transmission and
Dispatch Company (NTDC),a central purchaser, dispatcher and
wholesaler of power; the Central Power Purchasing Agency (CPPA)
which has been set up as an autonomous body to acquire power from
the generation companies (GENCOs),on behalf of the distribution
companies (DISCOs),and deliver it via the NTDC network; nine power
distribution companies (DISCOS),including one for the Federally
Administered Tribal Areas; the Karachi Electric Supply Corporation,
a private generation and distribution company covering Karachi; and
the independent power producers (IPPs),the privately-owned power
generation companies selling to the NTDC.
--------------
MINISTRIES
--------------
6. (SBU) Each federal ministry in the Pakistani government is headed
by a Minister. A Secretary (a vice Minister equivalent) heads the
administrative functions of the Ministry and is assisted by varying
numbers of second tier Additional Secretaries and Members. While
Additional Secretaries are career civil servants with functional and
administrative background in that Ministries' functional area,
Members are subject specialists with specific professional
qualifications. At the third and fourth tier of each ministry are
varying numbers of Joint Secretaries and Deputy Secretaries. In the
energy policy making arena, each committee and subordinate agency
contains a crisscrossing network of appointments from this cadre to
ensure full authority by the federal government over the
"privatized" joint ventures and provincial bodies.
ISLAMABAD 00001623 002 OF 005
--------------
Ministry of Water and Power
--------------
7. (SBU) The Ministry of Water and Power (MWP) develops all policy
relating to water and power as well as the strategic and financial
planning for both the public and private sector. A Secretary heads
the administrative functions and is assisted by an additional
secretary, three joint secretaries, an advisor and a member.
SIPDIS
8. (SBU) The Ministry of Water and Power monitors activities in the
fields of power generation, transmission and distribution, and
performs a supervisory and advisory role for the power sector's
overall smooth operation. MWP reviews all public sector power
projects submitted by the Water and Power Development Authority
(WAPDA) and its 19 "unbundled" corporations with a mandate to
scrutinize the technical and financial viability. Similarly all
private sector projects in the power sector are approved by the
Private Power and Infrastructure Board (PPIB) under the close
supervision of the MWP which sets the policy guidelines for
approval. The MWP also oversees preparation of the five year plans
and the Annual Development Program (ADP) in the water and power
sector. Areas of conflict arise due to this delegated oversight
review capacity delegated to the MWP which pits government oversight
against private sector competitiveness.
9. (SBU) In its water capacity, the MWP also coordinates
inter-provincial water sharing issues and activities related to
irrigation, drainage, water logging and monitors the operation of
Indus Water Treaty of 1960 between Pakistan and India. The Water
and Power Wing are the main functionaries of the MWP including
office of Chief Engineering Adviser/Chairman, Federal Flood
Commission and PPIB.
--------------
SUBORDINATE ORGANIZATIONS OF THE MWP
--------------
10. (SBU) There are 19 subordinate, yet distinctly independent
organizations, which report to the Ministry of Water and Power.
Descriptions follow below.
--------------
Water and Power Development Authority
--------------
11. (SBU) With a umbrella workforce of 175,000 employees, and 14
subordinate agencies, Pakistan's Water and Power Development
Authority (WAPDA) is one of the largest employers in Pakistan.
WAPDA, Pakistan's only remaining public sector utility company, was
created in 1958 to coordinate and develop the water and power
sectors. WAPDA is headed by a Chairman, appointed by the Prime
Minister for a three-year renewable term.
12. (SBU) Since October 2007, WAPDA has been separated into two
distinct entities: WAPDA and the Pakistan Electric Power Company
(PEPCO). Headed by a Chairman and assisted by three Members, for
water, power and finance, WAPDA is responsible for water and
hydropower development, whereas PEPCO is responsible for overseeing
the privatization efforts related to thermal power generation,
transmission, distribution and billing. However, privatization
efforts have remained stalled for over a decade and WAPDA continues
to forestall approval of drastically needed reforms to allow the
unbundling to continue.
--------------
Pakistan Electric Power Company
--------------
13. (SBU) Established in 1992, Pakistan Electric Power Company
(PEPCO) was established as a state owned private limited management
company to manage and oversee activities related to privatization.
PEPCO now has an independent Chairman and Managing Director. While
GOP interlocutors tout PEPCO's independence, in practice PEPCO must
get approval from WAPDA for decisions who in turn seeks approval
from the MWP. "Privatization" has not translated into
"independence" in Pakistan's energy sector.
ISLAMABAD 00001623 003 OF 005
14. (SBU) The unbundling of the power sector has resulted in the
formation of fourteen corporate entities; three power generation
companies (GENCOs),one national transmission and power dispatch
company (NTDC) and nine distribution companies (DISCOs). These
companies are each working under independent Boards of Directors.
Yet, WAPDA still controls the finances of all these companies and in
turn must get permission from the Ministry of Water and Power to
make payments to each entity.
15. (SBU) Despite GOP claims that these companies are
administratively autonomous, none of these distribution companies
have any autonomy over their finances sixteen years after creation.
Privatization efforts have stalled due to the inability of these
companies to set their own tariffs based on the marginal cost of
their individual production and largely because of the GOP's
continued use of fuel subsidies which prohibits any free market
price stabilization.
16. (SBU) The three GENCOS are Jamshoro Power Generation Company
covering the south, Central Power Generation Company covering the
central areas, and Northern Power Generation Company covering the
north. The nine DISCOs include Faisalabad Electric Supply Company
(FESC); Gujranwala Electric Supply Company (GESC); Hyderabad
Electric Supply Company (HESC); Islamabad Electric Supply Company
(IESC); Karachi Electric Supply Corporation (KESC); Lahore Electric
Supply Company (LESC); Multan Electric Supply Company (MESC);
Peshawar Electric Supply Company (PESC); and FATA Electric Supply
Company (FATA ESC).
--------------
Karachi Electric Supply Corporation
--------------
17. (SBU) The Karachi Electric Supply Company (KESC) was
incorporated in 1913, and the Government of Pakistan took control by
acquiring a majority shareholding in 1952. As Pakistan's only
"private" sector utility company, KESC's privatization was finalized
in November 2005 with the transfer of management control and a 73
percent share from the GOP. KESC is listed on the Karachi, Lahore
and Islamabad Stock Exchanges.
18. (SBU) KESC generates, transmits and distributes electricity.
KESC provides electricity to some 12 million people through two
million connections over a 6000 square kilometer area. Its two
million connections reach a customer base that is primarily
residential (1.5 million) and industrial (425,000).
19. (SBU) Despite privatization, the MWP meddles in the business
affairs of KESC to ensure consistent electricity rates, manage the
KESC debt and also gives permission to WAPDA to bridge any demand
and supply gaps. KESC is not free to set its own tariff rate and
thus operates at a loss. The GOP's use of fuel subsidies forestalls
KESC's ability to charge competitive market rates.
20. (SBU) KESC is still purchasing electricity from WAPDA to meet
its needs two years after privatization. Infrastructure upgrades
cause severe strain on KESC's financial resources. As a result,
WAPDA and KESC have continual payment disputes. Most recently, in
March 2008, WAPDA literally turned the lights off, plunging
Karachi's 12 million people into darkness for up to 8 hours in
various parts of the city because KESC owes WAPDA USD 558 million.
While WAPDA only cut the electricity for 1 hour and 25 minutes, KESC
was unable to restart its systems properly due to its outdated
equipment. (Ref E).
--------------
Private Power and Infrastructure Board
--------------
21. (SBU) The Private Power and Infrastructure Board (PPIB) was
created in 1994 to facilitate private sector investment in power
generation with a "One-Window" facility for the establishment of
power projects and related infrastructure. PPIB is responsible for
the negotiation of implementation agreements, establishing investor
incentives, and clarifying investor rights and obligations. PPIB
also provides a guarantee to the individual power producers (IPPs)
for the performance of the power purchaser and fuel supplier. It
ISLAMABAD 00001623 004 OF 005
also assists the regulatory authority (NEPRA) in determining and
approving the tariff for new private power projects.
22. (SBU) PPIB also provides support to the power purchaser and
fuel supplier while negotiating the Power Purchase Agreement (PPA),
Fuel Supply Agreement (FSA)/Gas Supply Agreement (GSA),other
related agreements, and serves as a liaison with local and
international agencies for facilitating and expediting progress of
private sector power projects.
23. (SBU) The Minister for Water and Power serves as the Managing
Director of the PPIB. The organization is governed by a Board of
Directors which consists of the Minister for Water and Power; the
Advisor to the Prime Minister on Energy; the Secretaries from the
Ministries of Water and Power, Petroleum and Natural Resources,
Finance, and the Board of Investment, plus the Member Planning
Commission, the Chairman of WAPDA and the Managing Director of PPIB.
The Managing Director is responsible for the administrative control
of the organization and is assisted by four directors in the areas
of administration, finance, projects and legal.
--------------
Alternative Energy Development Board
--------------
24. (SBU) The Alternative Energy Development Board (AEDB) is
mandated to act as a "One-Window" facility for establishing,
promoting and facilitating renewable energy projects based on wind,
solar, small-hydel, fuel cells, tidal, ocean, biogas, and biomass.
25. (SBU) AEDB is governed by a Board of Directors chaired by the
Minister of Water and Power. The other members are the MWP Chief
Executive Officer, AEDB Secretary, Advisor to the Prime Minister on
Energy, and Secretaries from Ministries of Finance, Water and Power,
Science and Technology, Petroleum and Natural Resources, Planning
Commission and Environment. The board also has three Members from
the private sector.
26. (SBU) The GOP has tasked the Board to ensure that five percent
of the total national power generation capacity (or approximately
970 MW) will be generated through renewable energy technologies by
the year 2030. In addition, under the remote village
electrification program, AEDB has been directed to electrify 7874
remote villages in Sindh and Balochistan provinces using renewable
energy. The AEDB is responsible for creating development which
incorporates private sector participation in plans for solar
products, including lights, fans, stoves, and heaters.
27. (SBU) The AEDB has thus far issued 94 letters of intent to
potential investors for setting up 50 MW wind power plants; however,
none are operational yet because of on-going land title disputes and
the absence of a set tariff. The inability of the AEDB to produce
tangible projects resulted in internal political shifts. While
established in May 2003 as an autonomous Cabinet division, the
administrative control of the Board was downgraded to be subservient
to the MWP in February 2006, and the subsequently ruffled feathers
are still visible in turf wars over control of various projects.
-------------- --------------
Pakistan Council of Renewable Energy Technologies
-------------- --------------
28. (SBU) Under the administrative control of the Ministry of
Science and Technology, the Pakistan Council of Renewable Energy
Technologies (PCRET) coordinates renewable energy technology
research and development. PCRET is actively involved in research and
development activities in photovoltaic, solar thermal applications,
micro-hydel power plants, biogas plants and wind energy. AEDB and
PCRET have duplicative mandates, yet AEDB falls under the MWP and
PCRET under the Ministry of Science and Technology.
--------------
National Engineering Services Pakistan
--------------
29. (SBU) Established in 1973 as a private company by the GOP, the
National Engineering Services Pakistan (NESPAK) is ranked in the
ISLAMABAD 00001623 005 OF 005
world's top 200 consulting firms. With a staff of over 2400
employees including 1900 engineers, architects, planners,
geologists, economists and other professionals, NESPAK has
undertaken 2816 projects worth USD 151 billion, of which 2419 are
domestic and 397 are overseas.
30. (SBU) NESPAK specializes in power and mechanical engineering;
water and agriculture; architecture and planning; highways, bridges,
airports and seaports; environmental and public health engineering;
engineering for industry; heating, ventilation and air-conditioning;
information technology and geographical information systems. NESPAK
has provided pre-feasibility and feasibility studies to power
producers in public and private sectors.
--------------
National Power Construction Company
--------------
31. (SBU) A state owned enterprise under the control of the MWP,
the National Power Construction Corporation (NPCC),was established
in 1974 to execute power engineering projects including extra high
voltage transmission lines, cable networks, distribution network,
substations, power generation plants, industrial electrification,
and even the external lighting of housing complexes. The Secretary
of Water and Power heads the NPCC's five member Board of Directors
drawn from the Ministries of Water and Power and Finance. With an
enormously expansive mandate, NPCC was created to ensure speedy
execution of power projects.
--------------
Pakistan Engineering Council
--------------
32. (SBU) Created in 1976, the Pakistan Engineering Council (PEC)
is a regulatory body responsible for overseeing the transparency of
bidding documents, setting evaluation criteria as well as awards and
execution of construction and consultancy contracts for public and
private sector power projects. PEC works with both federal and
provincial governments and must approve project proposals. The PEC
also regulates the engineering profession in Pakistan and oversees
the accreditation of engineering programs at all educational
institutions.
PATTERSON
SIPDIS
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ENGY EFIN ECON EINV PREL PK
SUBJECT: NAVIGATING THE MAZE OF PAKISTANI ENERGY POLICY- PART ONE
REFS: A) Islamabad 00655 B) Islamabad 00810 C) Islamabad 00921 D)
Islamabad 01420 E) Karachi 199
1. (SBU) SUMMARY: Pakistan's energy crisis has the potential to slow
down economic growth and create law and order problems. With
massive blackouts affecting every region and every demographic,
energy policy and shortages are daily front page news. Not a single
mega-watt of electricity has been added to Pakistan's national grid
since 2000 despite record breaking economic growth and population
expansion. With economic and manufacturing capacity slumping due to
power outages, unemployment is increasing while tempers and
temperatures are rising. Complicating the situation is the complex
maze of GOP policy makers who cannot coordinate Pakistan's energy
policy due to overlapping and contradictory authorities. As a
reference for USG efforts in providing aid to Pakistan's energy
sector, the following serves as a roadmap of GOP energy policy
making bodies and entities. END SUMMARY.
2. (SBU) This three part cable reviews the haphazard mix of
horizontally and vertically placed institutions which comprise the
energy policy making sector of Pakistan. Part one explains the
Ministry of Water and Power and its 19 subordinate agencies involved
with electricity. Part two, in "Navigating the Energy Maze," will
address the Ministry of Petroleum and National Resources and the 16
subordinate agencies. Part three will address the other 4
Ministries and 7 other agencies involved in and at various levels of
the GOP energy policy process. A lack of coordination and absence
of any clear line of authority hampers any formulation of policy
efforts to address the current energy crisis in Pakistan.
3. (SBU) This is a continuation of cables on Pakistan's energy
sector.
--------------
A SIMPLIFIED OVERVIEW
--------------
4. (SBU) The lead line agency in government for the electric power
sector is the Ministry of Water and Power. However, the Ministry of
Petroleum and Natural Resources controls fuel supplies; the Finance
Ministry holds the purse strings; the Planning Commission manages
the investment approval process; and National Electric Power
Regulatory Authority (NEPRA) regulates companies operating in the
power sector. These operating companies include the Water and Power
Development Authority (WAPDA),owner of the public sector hydro
power plants, and the Pakistan Electric Power Company (PEPCO),the
holding company for WAPDA.
5. (SBU) PEPCO includes three power generating companies (GENCOS),
in the south, center and north; the National Transmission and
Dispatch Company (NTDC),a central purchaser, dispatcher and
wholesaler of power; the Central Power Purchasing Agency (CPPA)
which has been set up as an autonomous body to acquire power from
the generation companies (GENCOs),on behalf of the distribution
companies (DISCOs),and deliver it via the NTDC network; nine power
distribution companies (DISCOS),including one for the Federally
Administered Tribal Areas; the Karachi Electric Supply Corporation,
a private generation and distribution company covering Karachi; and
the independent power producers (IPPs),the privately-owned power
generation companies selling to the NTDC.
--------------
MINISTRIES
--------------
6. (SBU) Each federal ministry in the Pakistani government is headed
by a Minister. A Secretary (a vice Minister equivalent) heads the
administrative functions of the Ministry and is assisted by varying
numbers of second tier Additional Secretaries and Members. While
Additional Secretaries are career civil servants with functional and
administrative background in that Ministries' functional area,
Members are subject specialists with specific professional
qualifications. At the third and fourth tier of each ministry are
varying numbers of Joint Secretaries and Deputy Secretaries. In the
energy policy making arena, each committee and subordinate agency
contains a crisscrossing network of appointments from this cadre to
ensure full authority by the federal government over the
"privatized" joint ventures and provincial bodies.
ISLAMABAD 00001623 002 OF 005
--------------
Ministry of Water and Power
--------------
7. (SBU) The Ministry of Water and Power (MWP) develops all policy
relating to water and power as well as the strategic and financial
planning for both the public and private sector. A Secretary heads
the administrative functions and is assisted by an additional
secretary, three joint secretaries, an advisor and a member.
SIPDIS
8. (SBU) The Ministry of Water and Power monitors activities in the
fields of power generation, transmission and distribution, and
performs a supervisory and advisory role for the power sector's
overall smooth operation. MWP reviews all public sector power
projects submitted by the Water and Power Development Authority
(WAPDA) and its 19 "unbundled" corporations with a mandate to
scrutinize the technical and financial viability. Similarly all
private sector projects in the power sector are approved by the
Private Power and Infrastructure Board (PPIB) under the close
supervision of the MWP which sets the policy guidelines for
approval. The MWP also oversees preparation of the five year plans
and the Annual Development Program (ADP) in the water and power
sector. Areas of conflict arise due to this delegated oversight
review capacity delegated to the MWP which pits government oversight
against private sector competitiveness.
9. (SBU) In its water capacity, the MWP also coordinates
inter-provincial water sharing issues and activities related to
irrigation, drainage, water logging and monitors the operation of
Indus Water Treaty of 1960 between Pakistan and India. The Water
and Power Wing are the main functionaries of the MWP including
office of Chief Engineering Adviser/Chairman, Federal Flood
Commission and PPIB.
--------------
SUBORDINATE ORGANIZATIONS OF THE MWP
--------------
10. (SBU) There are 19 subordinate, yet distinctly independent
organizations, which report to the Ministry of Water and Power.
Descriptions follow below.
--------------
Water and Power Development Authority
--------------
11. (SBU) With a umbrella workforce of 175,000 employees, and 14
subordinate agencies, Pakistan's Water and Power Development
Authority (WAPDA) is one of the largest employers in Pakistan.
WAPDA, Pakistan's only remaining public sector utility company, was
created in 1958 to coordinate and develop the water and power
sectors. WAPDA is headed by a Chairman, appointed by the Prime
Minister for a three-year renewable term.
12. (SBU) Since October 2007, WAPDA has been separated into two
distinct entities: WAPDA and the Pakistan Electric Power Company
(PEPCO). Headed by a Chairman and assisted by three Members, for
water, power and finance, WAPDA is responsible for water and
hydropower development, whereas PEPCO is responsible for overseeing
the privatization efforts related to thermal power generation,
transmission, distribution and billing. However, privatization
efforts have remained stalled for over a decade and WAPDA continues
to forestall approval of drastically needed reforms to allow the
unbundling to continue.
--------------
Pakistan Electric Power Company
--------------
13. (SBU) Established in 1992, Pakistan Electric Power Company
(PEPCO) was established as a state owned private limited management
company to manage and oversee activities related to privatization.
PEPCO now has an independent Chairman and Managing Director. While
GOP interlocutors tout PEPCO's independence, in practice PEPCO must
get approval from WAPDA for decisions who in turn seeks approval
from the MWP. "Privatization" has not translated into
"independence" in Pakistan's energy sector.
ISLAMABAD 00001623 003 OF 005
14. (SBU) The unbundling of the power sector has resulted in the
formation of fourteen corporate entities; three power generation
companies (GENCOs),one national transmission and power dispatch
company (NTDC) and nine distribution companies (DISCOs). These
companies are each working under independent Boards of Directors.
Yet, WAPDA still controls the finances of all these companies and in
turn must get permission from the Ministry of Water and Power to
make payments to each entity.
15. (SBU) Despite GOP claims that these companies are
administratively autonomous, none of these distribution companies
have any autonomy over their finances sixteen years after creation.
Privatization efforts have stalled due to the inability of these
companies to set their own tariffs based on the marginal cost of
their individual production and largely because of the GOP's
continued use of fuel subsidies which prohibits any free market
price stabilization.
16. (SBU) The three GENCOS are Jamshoro Power Generation Company
covering the south, Central Power Generation Company covering the
central areas, and Northern Power Generation Company covering the
north. The nine DISCOs include Faisalabad Electric Supply Company
(FESC); Gujranwala Electric Supply Company (GESC); Hyderabad
Electric Supply Company (HESC); Islamabad Electric Supply Company
(IESC); Karachi Electric Supply Corporation (KESC); Lahore Electric
Supply Company (LESC); Multan Electric Supply Company (MESC);
Peshawar Electric Supply Company (PESC); and FATA Electric Supply
Company (FATA ESC).
--------------
Karachi Electric Supply Corporation
--------------
17. (SBU) The Karachi Electric Supply Company (KESC) was
incorporated in 1913, and the Government of Pakistan took control by
acquiring a majority shareholding in 1952. As Pakistan's only
"private" sector utility company, KESC's privatization was finalized
in November 2005 with the transfer of management control and a 73
percent share from the GOP. KESC is listed on the Karachi, Lahore
and Islamabad Stock Exchanges.
18. (SBU) KESC generates, transmits and distributes electricity.
KESC provides electricity to some 12 million people through two
million connections over a 6000 square kilometer area. Its two
million connections reach a customer base that is primarily
residential (1.5 million) and industrial (425,000).
19. (SBU) Despite privatization, the MWP meddles in the business
affairs of KESC to ensure consistent electricity rates, manage the
KESC debt and also gives permission to WAPDA to bridge any demand
and supply gaps. KESC is not free to set its own tariff rate and
thus operates at a loss. The GOP's use of fuel subsidies forestalls
KESC's ability to charge competitive market rates.
20. (SBU) KESC is still purchasing electricity from WAPDA to meet
its needs two years after privatization. Infrastructure upgrades
cause severe strain on KESC's financial resources. As a result,
WAPDA and KESC have continual payment disputes. Most recently, in
March 2008, WAPDA literally turned the lights off, plunging
Karachi's 12 million people into darkness for up to 8 hours in
various parts of the city because KESC owes WAPDA USD 558 million.
While WAPDA only cut the electricity for 1 hour and 25 minutes, KESC
was unable to restart its systems properly due to its outdated
equipment. (Ref E).
--------------
Private Power and Infrastructure Board
--------------
21. (SBU) The Private Power and Infrastructure Board (PPIB) was
created in 1994 to facilitate private sector investment in power
generation with a "One-Window" facility for the establishment of
power projects and related infrastructure. PPIB is responsible for
the negotiation of implementation agreements, establishing investor
incentives, and clarifying investor rights and obligations. PPIB
also provides a guarantee to the individual power producers (IPPs)
for the performance of the power purchaser and fuel supplier. It
ISLAMABAD 00001623 004 OF 005
also assists the regulatory authority (NEPRA) in determining and
approving the tariff for new private power projects.
22. (SBU) PPIB also provides support to the power purchaser and
fuel supplier while negotiating the Power Purchase Agreement (PPA),
Fuel Supply Agreement (FSA)/Gas Supply Agreement (GSA),other
related agreements, and serves as a liaison with local and
international agencies for facilitating and expediting progress of
private sector power projects.
23. (SBU) The Minister for Water and Power serves as the Managing
Director of the PPIB. The organization is governed by a Board of
Directors which consists of the Minister for Water and Power; the
Advisor to the Prime Minister on Energy; the Secretaries from the
Ministries of Water and Power, Petroleum and Natural Resources,
Finance, and the Board of Investment, plus the Member Planning
Commission, the Chairman of WAPDA and the Managing Director of PPIB.
The Managing Director is responsible for the administrative control
of the organization and is assisted by four directors in the areas
of administration, finance, projects and legal.
--------------
Alternative Energy Development Board
--------------
24. (SBU) The Alternative Energy Development Board (AEDB) is
mandated to act as a "One-Window" facility for establishing,
promoting and facilitating renewable energy projects based on wind,
solar, small-hydel, fuel cells, tidal, ocean, biogas, and biomass.
25. (SBU) AEDB is governed by a Board of Directors chaired by the
Minister of Water and Power. The other members are the MWP Chief
Executive Officer, AEDB Secretary, Advisor to the Prime Minister on
Energy, and Secretaries from Ministries of Finance, Water and Power,
Science and Technology, Petroleum and Natural Resources, Planning
Commission and Environment. The board also has three Members from
the private sector.
26. (SBU) The GOP has tasked the Board to ensure that five percent
of the total national power generation capacity (or approximately
970 MW) will be generated through renewable energy technologies by
the year 2030. In addition, under the remote village
electrification program, AEDB has been directed to electrify 7874
remote villages in Sindh and Balochistan provinces using renewable
energy. The AEDB is responsible for creating development which
incorporates private sector participation in plans for solar
products, including lights, fans, stoves, and heaters.
27. (SBU) The AEDB has thus far issued 94 letters of intent to
potential investors for setting up 50 MW wind power plants; however,
none are operational yet because of on-going land title disputes and
the absence of a set tariff. The inability of the AEDB to produce
tangible projects resulted in internal political shifts. While
established in May 2003 as an autonomous Cabinet division, the
administrative control of the Board was downgraded to be subservient
to the MWP in February 2006, and the subsequently ruffled feathers
are still visible in turf wars over control of various projects.
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Pakistan Council of Renewable Energy Technologies
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28. (SBU) Under the administrative control of the Ministry of
Science and Technology, the Pakistan Council of Renewable Energy
Technologies (PCRET) coordinates renewable energy technology
research and development. PCRET is actively involved in research and
development activities in photovoltaic, solar thermal applications,
micro-hydel power plants, biogas plants and wind energy. AEDB and
PCRET have duplicative mandates, yet AEDB falls under the MWP and
PCRET under the Ministry of Science and Technology.
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National Engineering Services Pakistan
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29. (SBU) Established in 1973 as a private company by the GOP, the
National Engineering Services Pakistan (NESPAK) is ranked in the
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world's top 200 consulting firms. With a staff of over 2400
employees including 1900 engineers, architects, planners,
geologists, economists and other professionals, NESPAK has
undertaken 2816 projects worth USD 151 billion, of which 2419 are
domestic and 397 are overseas.
30. (SBU) NESPAK specializes in power and mechanical engineering;
water and agriculture; architecture and planning; highways, bridges,
airports and seaports; environmental and public health engineering;
engineering for industry; heating, ventilation and air-conditioning;
information technology and geographical information systems. NESPAK
has provided pre-feasibility and feasibility studies to power
producers in public and private sectors.
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National Power Construction Company
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31. (SBU) A state owned enterprise under the control of the MWP,
the National Power Construction Corporation (NPCC),was established
in 1974 to execute power engineering projects including extra high
voltage transmission lines, cable networks, distribution network,
substations, power generation plants, industrial electrification,
and even the external lighting of housing complexes. The Secretary
of Water and Power heads the NPCC's five member Board of Directors
drawn from the Ministries of Water and Power and Finance. With an
enormously expansive mandate, NPCC was created to ensure speedy
execution of power projects.
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Pakistan Engineering Council
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32. (SBU) Created in 1976, the Pakistan Engineering Council (PEC)
is a regulatory body responsible for overseeing the transparency of
bidding documents, setting evaluation criteria as well as awards and
execution of construction and consultancy contracts for public and
private sector power projects. PEC works with both federal and
provincial governments and must approve project proposals. The PEC
also regulates the engineering profession in Pakistan and oversees
the accreditation of engineering programs at all educational
institutions.
PATTERSON