A team of SEP is also in the federal capital and has met with Prime Minister Shahid Khaqan Abbasi, Minister for Power, Awais Leghari and Minister for Privatisation, Daniyal Aziz.
At a recent meeting of the CCoE in Karachi, Secretary Power Division expressed his apprehension that the timing of the present crisis was perhaps to build up pressure to get a favourable decision on tariff at the cost of citizens of Karachi. He also pointed out that NEPRA had clearly stated in its report on the crisis that the present management of Captions has failed to invest in generation, transmission and distribution. NTDC/CPPA was, therefore, forced to continue supply of 650 MW power to Captions for the sake of citizens of Karachi.
According to the SEP, in mid-April, representatives from SEP's Karachi Electric project team, accompanied by a group of technical professionals, made a trip to Karachi. Working closely with KE management teams, its team analyzed the causes of increased power outages and explored various solutions with immediate effect to prevent severe power shortages during the upcoming Ramazan and summer season.
"We have discovered that in addition to coping with shortage in natural gas supply, it is necessary for KE to also implement reforms and upgrades in the areas of technology, operations and management," the sources quoted the Chairman SEP as saying.
Paying gratitude to the Minister for Power, Chairman SEP further said that a consensus has been reached regarding a solution to the natural gas supply issue, on the technical front, SEP and KE have aligned short-term objectives, which include: (i) improving transmission system wiring; (ii) increasing power flow limits, especially those of overhead lines; (iii) commissioning certain facilities to enhance power supply capacity as an emergency measure; and( iv) ) optimizing power distribution under the principle of upholding living standards, commerce and social stability.
"These measures will put pressure on KE's existing grid operations and management, we believe they will increase KE's operating capabilities in the short term," he added.
Chairman SEP pointed out the following factors as fundamental reasons for power outages in Karachi: (i) chronic lack of investment;( ii) growing demand for electricity in Karachi, and a widening gap between demand and power generation, transmission and grid service capabilities; and (iii) uncertainty around SEP's investment in KE due to lack of clarity on the MYT mechanism and delays by the GOP in issuing other approvals required for transaction closing, resulting in delays in the execution of our business plan.
"Our biggest concern is that power interruption remains unavoidable and may even worsen regardless of the resolution of the gas supply issue unless urgent attention is focused on transaction closure between SEP and Abraaj. Such an increase in power outages will negatively impact growth of Karachi as well as the overall country," he said adding that "a delay of over 18 months in transaction closing and the lack of implementation of the company's business plan has exacerbated the issue dramatically," he continued.
Wang further stated that while Nepra's current review of tariff emphasizes the reasonableness of tariff reduction, lenders, SEP and KE place more weight on the potential impact of the new tariff on the company's sustainable operations and its ability to invest in the future. "I must point out that prior to transaction closing SEP is only able to provide technical and managerial advice and is unable to leverage its expertise in technology, operations, and management to facilitate any improvement in KE's overall capabilities. These factors will directly or indirectly affect KE's sustainable operations in the future as well as its ability to provide a reliable supply of power," he stated.
"I again request your (Minister for Power) attention to the gravity of this issue and propose coordination among all relevant parties to secure outstanding government approvals in a timely manner, as well as the approval of an MYT similar to the previous MYT (both in term of performance base and tariff level)," he further maintained.
Chairman SEP, in his letter has emphasized the importance of keeping the MYT mechanism consistent as previously proposed by KE, as well as the disruptive impact on deal closing in case of a tariff reduction. "We deem such a request fair and justified. It is the very premise of SEP's investment in KE and will result in improvement of KE's overall operations with the help of our technological and managerial expertise. This will also assist in the realization of the Government of Pakistan's promise to its people to eliminate load shedding across the entire country. Without such a MYT, the closure of our transaction is placed in imminent jeopardy," Wang maintained.
Meanwhile, Federal Minister for Privatisation, Daniyal Aziz chaired a meeting with representatives of Shanghai Electric Power Company (SEP) for the ongoing transaction of 66.40 percent shares of Karachi Electric Supply Company (KESC). The panel included secretary and senior officials of Privatisation Commission (PC) and the legal & financial representatives of SEP. The sale of shares is subject to the issuance of National Security Certificate (NSC) from the Government of Pakistan through the Privatisation Commission of Pakistan. PC approached line ministries/ regulatory bodies to seek their response as part of its due diligence before issuance of NSC.
The matter related to issuance of NSC will be completed shortly after the preliminary requirements are fulfilled. The work in this regard is going on fast track basis to finalize the subject transaction. The Federal Minister for PC appreciated the presence of SEP in power sector and termed it a positive sign for the rescue of power sector in Pakistan. The Federal Minister further said that SEP's investment in power sector could bring the economy on sound footing.
SEP entered into a sale and purchase agreement with the KES Power on October 28, 2016, it is an important Chinese company of repute and already working in Pakistan.
The Federal Minister for PC directed the authorities to expedite the process and further stated that the government of Pakistan is committed to strengthening the sector through massive foreign investment.