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N.A. ZUBERIMANAGING DIRECTOR

PRIVATE POWER & INFRASTRUCTURE BOARD

October 22, 2011

CONVERSION OF EXISTINGTHERMAL POWER PLANTSTO COAL

INTERNATIONAL COAL CONFERENCE

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C O N T E N T S Overview of Pakistan Power Sector

Power Plants for Coal Conversion

Issues on Conversion of Power Plants to Coal

Implementation Mechanism for Converting Plants to Coal

Key Features of Mechanism for Converting GENCOs/IPPs to Coal

Conclusion

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MW %

Public Sector

WAPDA/SHYDO/

NA/AJK 11,603 52PAEC 462 2

Sub-Total 12,065 54

Private Sector

IPPs 8,508 38

KESC 1,756 8

Sub-Total 10,264 46

G. Total 22,329 100

Public SectorThermal

4,900 MW

Nuclear462 MW

Public SectorHydel

6,703 MW

IPPs10,039 MW

PAKISTAN POWER SECTORTOTAL INSTALLED CAPACITY

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STEAM TURBINE POWER PLANTS

GAS TURBINE POWER PLANTS

COMBINED CYCLE POWER PLANTS

RECIPROCATION ENGINES

POWER GENERATIOINTECHNOLOGIES

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MARDAN

WARSAK

BANNU

DAUDKHEL

BURHANNEW RAWAT

I.S.P.R

MANGLA

TARBELA

GAKHAR

SAHOWALA

K.S.KAKU

RAVI

JAPAN

KELN.ABAD

SABA

YOUSAF WALA

VEHARI

KAPCO

ROUSCH

UCH

AES

N.G.P.SM.GARH

GUDDU

LIBERTY

DADU

HALARD

LAKHRA

JAMSHORO

KOTRI

HUBCO

KDA-33

(KESC)

500 kV Grid Station

220 kV Grid Station

500/220 kV Grid Station

Hydel Power Station

Thermal Power Station

IPPs at 220, 500 kV

IPPs at 132 kV

500 kV T/LINE

220 kV T/LINE

(240)

(3408)

(1000)

(107)

(120)

(195)

(1350)

(310)

CHEP

(184)

(355)

(1348)

HCPC(126)

(548)

(1655)

(212)

(150)

(850)

(174)

(1200)

GAZI BAROTHA

(1450)

CHASNUPP

GATTI

BUND RD:

M.GARHGUDDU

JAMSHORO

PAKISTAN POWER SECTOR TRANSMISSION SYSTEM

G.AHMAD

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PAKISTAN POWER SECTORFUEL MIX (2009-10)

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60% power generation based on gas & furnace oil

Gas becoming scarce

Exorbitant cost of imported oil/HSD

Double-edged sword of gas depletion and higher oil prices

resulted in huge circular debt running in billions

The panacea lies in converting thermal power plants to cheaper

fuels such as coal

EXISTING POWER SECTOR SITUATION

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For conventional steam turbine thermal units, the possible option

is to convert them to coal

The benefit of converting the furnace oil plants would be through

savings on fuel cost component

Expedite import of gas or use alternative fuels available such as

LNG for gas turbine or reciprocating engine

POSSIBLE SOLUTIONS TO IMPROVEPAKISTAN SECTOR

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CANDIDATE PLANTS FOR COAL CONVERSIONCapacity (MW)

Installed Derated

JAMSHORO 850 675

Guddu unit 3,4* 640 580

M.Garh 1370 1130

SPS faisalabad 1,2* 132 100

NGPS Multan Unit 1,2,3 195 120Sub Total GENCOs 3187 2605

HUBCO Unit 1,2,3,4 1292 1200

AES Lalpir 362 348

AES Pakgen 362 348

SABA Power 134 126

Sub-Total IPPs 2150 2022

Total 5337 4627

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Involvement of new Capital Costs Outage time to dismantle old boilers and

assemble/commission new ones

Additional auxiliary consumption thereby reducing the net

generation capacity

Higher O&M costs

Limitation of space for coal storage & ash handling

Probable reduction of efficiency

Availability of coal, and

Environment degradation

ISSUES ON CONVERSION OF STEAMPOWER PLANTS TO COAL

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Conversion of GENCOs plants to cheaper fuels is

visualized through induction of private sector

contractor(s) in Public Sector Power Stations (concept

approved)

IPPs conversion is visualized through devising a

Policy Regime (in process of approval)

IMPLEMENTATION MECHANISM FORCONVERSION TO CHEAPER FUELS

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CONVERSION OF GENCOs TO CHEAPER FUEL THROUGHINDUCTION OF PRIVATE SECTOR GENERATION

KEY FEATURES Induction of O&M Contractor for 10 years through open bidding

No retrenchment of existing staff;

No capital expenditure and no payment of mobilization advance by

GENCOs / Government of Pakistan (GOP)

No upward revision of tariff due to induction of O&M Contractor;

Evaluation & Selection of O&M Contractor through a criteria based on

benefit sharing, percentage of which to be determined through bidding

process;

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CONVERSION OF IPPS ON CHEAPER FUELSSALIENT FEATURES IPPs to carry out due diligence/feasibility study individually for cheaper

alternative fuels as per their technologies.

IPPs be given one year (or less if their conversion plan require less time)

for conversion during which they will be provided half of their Escalable

tariff component (which covers their returns etc) and full Non-Escalable

tariff component (which covers their debt servicing).

Any saving that would be achieved due to switching of fuels be shared

equally amongst the IPPs and the power purchaser.

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CONCLUSIONConversion of existing thermal power plants

to coal will develop the market for new coal

mines hence eliminate the MARKET RISK

especially for development of Thar Coal

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THANKS

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US$ Billion

Costs 1st year Benefits 1st Year Net Benefits

GENCOs 1.180 3.599 2.419

IPPs 0.805 2.519 1.714

Total 1.985 6.118 4.133

PROBABLE BENEFITS FROM CONVERSION OFSUITABLE CANDIDATE PROJECTS TO COAL

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BACKUP SLIDES

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CONVERSION ON CHEAPER FUELSSALIENT FEATURES Power Purchaser be allowed to legalize the arrangement and any

extensions in the Term of Power Purchase Agreements with IPPs pursuant

to 1994 Policy through Side Agreements without requiring any approval

from any government agency / regulator. For IPPs pursuant to 2002 Policy

necessary permission of regular shall be needed.

Power Purchaser to have right to negotiate and schedule outage timings

and number of units at a time for conversion, as well as fix priority of IPPs

if more than one IPP approach to it for conversion, and the feasibility study

favours one over the other.

Customs duty at the rate of 5% on the import of equipment, machinery and

spares for carrying out Balancing, Modernization and Replacement (BMR).

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PRE-DEVELOPMENT OF COAL MARKET A BASIC

INGREDIENT FOR DEVELOPMENT OF SINDH COAL

Conversion of existing thermal power plants will pre-develop the

market for new coal mines hence eliminating the MARKET RISK

especially for development of Thar Coal. As such we expect fullest

support of GOS in our venture.

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COST BENEFIT ANALYSIS (GENCOS)

Costs

Capital Cost US$ 1.15 billion

Increase in O& M expenses US$ 0.032 billion

Environmental mitigation cost (10% of total O&M) US$ 0.001 billion

Total Costs US$ 1.180 billion

Benefits

Fuel Cost Saving using imported coal US$ 3.599 billion

Net Benefits US$ 2.419 billion

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COST BENEFIT ANALYSIS (IPPS)Costs

Capital Cost US$ 0.774 billion

Increase in O& M expenses US$ 0.030 billion

Environmental mitigation cost (10% of total O&M) US$ 0.001 billion

Total Costs US$ 0.805 billion

Benefits

Fuel Cost Saving using imported coal US$ 2.519 billion

Net Benefits US$ 1.714 billion