Investing in Energy Today, Our key to a brighter tomorrow! 01 August 2013

2 The Problem Steps taken by Federal & Punjab Government in the first 50 days Punjab Energy Strategy & Investment Opportunities Enabling policies and incentives PRESENTATION AGENDA

Power shortfall = 4,000 MW – 6,000 MW per day Power shortages estimated to cost the economy 2% of GDP each year Difference in production and sale price on average Rs 5/unit - contributing to the circular debt issue Approx 4.1 million jobs and employment opportunities lost since 2008, roughly 7.5 percent of the workforce Power shortfall = 4,000 MW – 6,000 MW per day Power shortages estimated to cost the economy 2% of GDP each year Difference in production and sale price on average Rs 5/unit - contributing to the circular debt issue Approx 4.1 million jobs and employment opportunities lost since 2008, roughly 7.5 percent of the workforce 3 THE PROBLEM

4 Coal Oil Gas Nuclear Hydro Power Renewable Total (MW) 57% 1% 9% 2% 19% 12% 211,766 < 1% 28% 39% 3% 29% <1% 22,797 INSTALLED CAPACITY COMPARISON BETWEEN PAKISTAN & INDIA

Source: Regulatory Bodies 5 ELECTRICITY COST COMPARISON

Cumulative Installed Capacity: 22,797 MW Ave. Annual Power Generation: 12,278 MW Peak Generation achieved in July 2013: ~ 16,000 MW 6 INSTALLED CAPACITY & POWER GENERATION

Source: Investment Guide, Punjab Power Development Board 7 PAKISTAN ENERGY CONSUMPTION * * Graph based on Pakistan Yearbook

In Punjab, at present, there is a electricity demand-supply gap of about 3,500 MW Demand growing at 8% per year Source: Government of Punjab, Energy Department DISCODemand (MW)Supply (MW)Shortfall (MW) LESCO2,5001,5001,000 FESCO1, IESCO1, GEPCO1, MEPCO1, ,1174,7743,340 8 ELECTRICITY DEMAND & CONSUMPTION IN PUNJAB

Source: Government of Punjab, Energy Department CompanyDistribution Losses Revenue Collection Efficiency IESCO (Punjab)10.51%95.92% LESCO (Punjab)13.23%91.81% GEPCO (Punjab)10.72%95.97% FESCO (Punjab)10.59%97.04% MEPCO (Punjab)18.37%95.82% PESCO (KP)37.40%85.40% HESCO (Sindh)34.75%59.81% QESCO (Balochistan)20.12%57.67% KESC (Karachi)35.86%88.7% PUNJAB’S SYSTEM EFFICIENCIES COMPARED TO OTHER PROVINCES 9

10 MAJOR REFORM OF POWER SECTOR The Power Sector had structural issues in the past, but the newly elected government has taken bold steps to restore confidence: 1.Clearance of circular debt of Rs. 480 billion immediately 2.Decision to increase tariff to recover cost except targeted subsidy 3.Conversion of certain oil fired plants to coal to lower cost 4.Legislation for strict legal action against power & gas theft 5.New metering systems on grids/feeders to isolate theft 6.Decision to privatize most DISCOs and GENCOs 7.Institutional Reform and capacity building initiated With these bold decisions, subsidies will be eliminated within 2-3 years The Power Sector had structural issues in the past, but the newly elected government has taken bold steps to restore confidence: 1.Clearance of circular debt of Rs. 480 billion immediately 2.Decision to increase tariff to recover cost except targeted subsidy 3.Conversion of certain oil fired plants to coal to lower cost 4.Legislation for strict legal action against power & gas theft 5.New metering systems on grids/feeders to isolate theft 6.Decision to privatize most DISCOs and GENCOs 7.Institutional Reform and capacity building initiated With these bold decisions, subsidies will be eliminated within 2-3 years

11 SPECIFIC ACTIONS IN THE FIRST 50 DAYS 1.Formulation of New Energy Policy 2.Legal action against power & gas theft initiated 3.Inauguration of New Bong Hydroelectric Project (84 MW) 4.Revival of Nandipur Power Project (425 MW) 5.Progress on the G2G LNG Supply between Pakistan & Qatar 6.Attracting Chinese investment in Punjab Power Sector “This is just the beginning of our journey to achieve sustainable energy security at affordable cost” 1.Formulation of New Energy Policy 2.Legal action against power & gas theft initiated 3.Inauguration of New Bong Hydroelectric Project (84 MW) 4.Revival of Nandipur Power Project (425 MW) 5.Progress on the G2G LNG Supply between Pakistan & Qatar 6.Attracting Chinese investment in Punjab Power Sector “This is just the beginning of our journey to achieve sustainable energy security at affordable cost”

PUNJAB ENERGY STRATEGY AND INVESTMENT OPPORTUNITIES 12

VISION “To enhance Punjab’s energy security and fuel economic growth by creating an environment that can reliably meet the energy demands of all sectors of Punjab’s economy through a sustainable and affordable energy mix and its efficient use” Attract Private Sector Investment Provide Enabling Environment Promote Energy Efficiency PUNJAB ENERGY STRATEGY 13

14 PUNJAB’S INDIGENOUS RESOURCES Source Potential (MW) Completion Time (Years) Investment (M$/MW) Technology Leaders BIOMASS1, Denmark, Sweden, Spain BAGASSE1, India, Brazil, China SOLAR1, China, USA, Germany HYDEL China, India, USA 4,000

15 DivisionMills Co- Generation Potential MW BAHAWALPUR7 256 DG KHAN5 122 FAISALABAD GUJRANWALA3 62 LAHORE5 81 MULTAN1 12 SARGODHA6 109 SAHIWAL3 53 TOTAL46 1,000 BAGASSE BASED CO-GENERATION

India – 158 plants generating 2,666MW another 70 in pipeline High Pressure Co-generation key to tapping the potential – 67/110 Bar Conversion to high pressure boilers (67/87 kg/cm2) reduces power consumption by ~25-27% – Enhances Bagasse availability – Extends power generation beyond crushing season – 2 months 16 BAGASSE BASED CO-GENERATION

Case Study – Indicative Returns (based on NEPRA determination) 17 Levelized Upfront Tariff ¢/kWh Tariff for first 10 Years ¢/kWh Tariff from Year ¢/kWh % ¢/kWh Plant size MW20 Cost/MW MUSD1 Total Cost MUSD20 Power available for sale MW 18.3 Operating Days 164 Units sold in a year 72,138,600 Net Profit/year 677, Pay Back Years 5.90 BAGASSE BASED CO-GENERATION

Crop Biomass Type Area Under Crop (M. Acres) Gross Quantity of Biomass (M. Ton) Net Collectable Biomass (M. Ton) Consumed Locally (M. Ton) Minimum Available for Power Generation (M. Ton) CottonCotton Stalk WheatWheat Straw Rice Rice Straw Rice Husk Sugarcane Sugarcane Waste Corn Stalk Cobs Total (Excluding Bagasse) CROP BIOMASS POTENTIAL IN PUNJAB

CROP BIOMASS RESOURCES IN PUNJAB (ZONE WISE) Crop Gross Collectable Biomass (M. Ton) Cotton11.43 Wheat18.63 Rice6.26 Maize6.884 In addition, other crops also have potential resources

ZoneCodeDistrict ClustersIndustrial Cluster Biomass Potential (M. Ton) Electric Generation Potential MW Cotton C-1R.Y.Khan Industrial Estate R.Y.Khan C-2 Bahawalpur & Bahawalnagar Ahmadpur East Road & Hasilpur C-3Lodhran & Multan Multan Industrial Estate C-4Vehari & KhanewalMian Channu C-5 Muzaffargarh, D.G.Khan & Rajanpur Jampur Road D.G Khan Rice R-1Sialkot & NarowalSialkot R-2M.B.Din & HafizabadHafizabad R-3 Sheikhupura, Nankana Sahib & Lahore Lahore Sheikhupura Road R-4Gujranwala & GujratGujranwala ZONES OF BIOMASS POTENTIAL

ZoneCodeDistrict Clusters Industrial Cluster Biomass Potential (M. Ton) Electric Generation Potential MW Mix Cropping M-1Okara & Kasur Okara Depalpur Road M-2Sahiwal & PakpattanSahiwal M-3 Faisalabad & T.T.Singh Khurrianwala, Shahkot M-4 Chiniot, Jhang, Khushab & Sargodha Sargodha Industrial Estate M-5 Bhakkar, Layyah & Mianwali Sikindarabad Mianwali BIOMASS POTENTIAL OF ZONES

COTTON ZONE CodeDistricts Clusters Biomass Potential (M. Ton) C-1R.Y.Khan0.602 C-2 Bahawalpur & Bahawalnagar C-3Lodhran & Multan0.982 C-4Vehari & Khanewal1.328 C-5 Muzaffargarh, D.G.Khan & Rajanpur 0.911

MIXED CROP ZONE CodeDistricts Clusters Biomass Potential (M. Ton) M-1Okara & Kasur0.953 M-2Sahiwal & Pakpattan0.873 M-3Faisalabad & T.T.Singh0.417 M-4 Chniot, Jhang, Khushab & Sargodha M-5Bhakkar, Layyah & Mianwali0.400

RICE ZONE CodeDistricts Clusters Biomass Potential (M. Ton) R-1Sialkot & Narowal0.510 R-2M.B.Din & Hafizabad0.476 R-3 Sheikhupura, Nankana Sahib & Lahore R-4Gujranwala & Gujrat0.946

SEASONAL AVAILABILITY (MAJOR CROPS ) Product JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC Wheat Cotton Rice Straw Husk Corn Stalk Cobs

SEASONAL AVAILABILITY (MINOR CROPS) Product JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC Mustard Millet Barley Groundnut Gram Potato Sunflower

Generation of at least 300 MW from this source Stand alone biomass or biomass-coal mix plants Proposed plant sizes is 5 MW to 30 MW across the crop zones ideally in industrial clusters Detailed survey of agriculture waste resource resource Regulatory framework to establish zones and enforce territorial restrictions 28 BIOMASS POWER GENERATION

REGULATORY FRAMEWORK Punjab Industries (Control on Establishment and Enlargement) Ordinance 1963 – Sec. 3 & 4: Territorial restrictions on industrial undertakings (biomass plants) – Sec. 8: Penalty of imprisonment up to 1 year or fine or both Punjab Environmental Protection Act 1997 – Sec. 11: Burning of crop residue in field can be prohibited – Sec 17: Penalty of up to Rs. 5 million fine New biomass specific regulatory framework as well

Case Study – Indicative Returns (based on estimates) 30 Levelized Upfront Tariff ¢/kWh Tariff for first 10 Years ¢/kWh Tariff from Year ¢/kWh % ¢/kWh1.18 Plant size MW 10 Cost/MW MUSD 1.8 Total Cost MUSD 18 Power available for sale MW 8.8 Operating Days 292 Units sold in a season 61,670,400 Net Profit/season 729, Pay Back Years 4.93 BIOMASS POWER GENERATION

INVESTMENT OPPORTUNITIES IN HYDEL & SOLAR 31

HYDEL POWER POTENTIAL IN PUNJAB 32 HYDEL POWER POTENTIAL IN PUNJAB Head works/ Barrages14 Main Canals24 Small Dams49 Hydro Potential: On Rivers325 MW Hydro Potential: On Canal475 MW

33 HYDEL POWER POTENTIAL IN PUNJAB ON CANAL

Case Study – Indicative Returns (based on feasibility study tariff ) run of canal distt. sahiwal 34 Levelized Upfront Tariff ¢/kWh Tariff for first 10 Years ¢/kWh Tariff from Year ¢/kWh % ¢/kWh Plant size MW 4.8 Cost/MW MUSD 2.57 Total Cost MUSD Power available for sale MW 4.8 Operating Days 365 Units sold in a year 42,048,000 Net Revenue/year 463, Pay Back Years 5.32 SMALL HYDEL POWER GENERATION

35 SOLAR POWER POTENTIAL

36 Solar Power Potential One of the best Solar Irradiation in South Punjab 5.6 to 6.4 KwH/Sqm/Day Effective utilization hours per year >2,000 10,000 acre of land allocated for Solar Park at Cholistan Named “Quaid-e-Azam Solar Park” 2,500 acre in Maroot district Bhawalnagar and 7,500 acre at Deengarh road tehsil Yazman 220KV line 45 Km from Yazman 5 projects (~300MW) currently parked in Cholistan Interest from Chinese Investors

37 SOLAR POWER POTENTIAL One of the best Solar Irradiation in South Punjab 5.6 to 6.4 kW/Sqm/Day Average sunlight availability 6-8 Hrs/day over 2,000 effective utilization hours/yr 5,000 acre of land allocated for Cholistan Solar Park 2,500 acre each in Maroot district Bhawalnagar and Deengarh road tehsil Yazman 220KV line 45 Km from Yazman 5 projects (~300MW) currently parked in Cholistan Interest from Chinese Investors CHOLISTAN SOLAR PARK – E N 40 Km from BWP 140 KM from Multan

38 CHOLISTAN SOLAR PARK – E N

Snowden Study indicates reserves of 596 MT – 443 MT assured. Currently mined ~ 1.0 MT – Jhelum, Chakwal, Khushab & Mianwali Rank-D, Bituminous category as against Sub-bituminous ascertained earlier Can produce 3,700 MW for 30 Years Punjab Minerals Company (PMC) to develop and manage local coal resources 39 PUNJAB COAL RESOURCES

Case Study – Indicative Returns 200 MW (based on NEPRA determination) 40 Levelized Upfront Tariff ¢/kWh 9.64 Tariff for first 10 Years ¢/kWh Tariff from Year ¢/kWh % ¢/kWh0.85 Plant size MW 219 Cost/MW MUSD 1.16 Total Cost MUSD Power available for sale MW Units sold in a year 1,745,780,400 Net Profit/year 14,874, Pay Back Years 5.17 LOCAL COAL BASED POWER GENERATION

41 Bagasse Optimization Up gradation 800 MW 30 months End 2015 Biomass < 10 MW Plants Exclusion Zones 300 MW 30 months End 2015 Solar Cholistan 1,000 MW 24 months Mid 2015 Small Hydel Run of canal 100 MW 36 months Mid 2016 BRIDGING THE ENERGY GAP – THE PLAN

42 Hydel Run of River 120 MW 48 months Mid 2017 Coal Local 200 MW 36 months Mid 2016 Coal Imported Coast 2,700 MW 48 months Mid 2017 TOTAL 5,220 MW 48 months Mid 2017 BRIDGING THE ENERGY GAP – THE PLAN Link

ENABLING POLICIES AND INCENTIVES 43

REGULATORY STRUCTURE 44 POLICY FRAMEWORK Federal Power Generation Policy 2002 Federal Renewable Energy Policy 2006 Federal Bagasse Based Co-Generation Policy 2008 Punjab Power Generation Policy 2006 (2009) Federal Energy Policy 2013 ENABLING POLICIES & INCENTIVES

REGULATORY STRUCTURE 45 REGULATORY FRAMEWORK NEPRA Generating Licenses IPPs, CPPs, Co-Gen ENABLING POLICIES & INCENTIVES CONTRACTUAL MECHANISM Guaranteed power purchase for IPPs Upfront tariffs Sovereign Guarantees Standardized IA, PPAs

46 ATTRACTIVE RETURNS Ave. 17% RoE on Renewable Energy projects 20% for projects on local Coal Solar & Biomass in pipeline CUSTOMS DUTY EXPEMTION 5% on import of Plant & Equipment not manufactured locally No Duties on Renewable Energy Plants & Equipment FINANCIAL & FISCAL INCENTIVES ENABLING POLICIES & INCENTIVES

47 TAX EXEMPTIONS Exemption from Income tax Exemption from Turnover tax and Exemption from Withholding tax on imports FINANCIAL & FISCAL INCENTIVES ENABLING POLICIES & INCENTIVES

48 ENERGY & INFRASTRUCTURE DEVELOPMENT FUND (EIDF) GoPb and leading financial institutions Managed by independent world class fund managers To support Investment in Power projects & Infrastructure in Punjab Undertake PPP where required POLICY INTERVENTIONS PLANNED - PUNJAB

49 RENEWABLE ENERGY PARTNERSHIP PROGRAM (ReEPP) Concessional Loans for up-to 20 % of the cost at reduced rates State land on lease where feasible and available INVESTOR FACILITATION One window service - PPDB GoPb to facilitate land acquisitions Fast track processing & transparency POLICY INTERVENTIONS PLANNED - PUNJAB

50 REGULATORY CPPs, IPPs & Co-Gen allowed to sell % age of their capacity to bulk users Private Power Distribution Residential Net-Metering Wheeling arrangements. Standard Wheeling agreements ADDITIONAL INTERVENTIONS BEING PROPOSED

51 INDICATIVE WHEELING CHARGES CALCULATION LESCO Charges Rs/unit NTDC Charges Rs/unit TOTAL Charges Rs/unit If only 132KV involved If both 132 KV&11KV involved NTDC WHEELING CHARGES Fixed - Rs/Kw/Month102 Variable - Rs/KwH0.233

52 UPFRONT TARIFFS Early Completion Bonus RoE for limited period Dual Fuel Tariff for Bagasse and Biomass Upfront tariff for low head small hydel ACCELERATED DEPRECIATION Up-to 80% depreciation in the first year for Renewable Energy based power generation equipment ADDITIONAL INTERVENTIONS BEING PROPOSED

53 SOLID & GROWING DEMAND ATTRACTIVE RETURNS FISCAL & FINANCIAL INCENTIVES SOVEREIGN GUARANTEES PUNJAB ENERGY PUNJAB ENERGY – A SMART INVESTMENT

Investing in Energy Today Our Key to a Brighter Tomorrow 54

1,800 Acres Pakistan Power Park Figures are Approximations. Not drawn to scale. Land ownership, public / private, might have changed.. Link

Jetty 660 MW IPP Common Housing & Amenities Common Switchyard 660 MW IPP Common Water Supply Ash Disposal and Recycling it into Useful By Products Cooling Water Intake Common Coal Storage (Dead Stock) (maintained by Coal Supplier) 660 MW IPP Shipping and Common Coal Supplier Separate Coal Storages (Live) for each IPP (maintained by each IPP separately) Pakistan Power Park: Typical Configuration Subject to Consultant’s review. Breakwater Link