Wind energy projects’ take-off

AFTER a long delay, Pakistan has finally embarked upon a long-term plan to generate wind-power on commercial scale. Financial close of the two landmark projects, initiated in 2005-06, has recently been achieved. This may pave the way for other projects in the pipeline to move on fast track.

Zorlu Enerji Pakistan, a 100 per cent subsidiary of the Turkish Zorlu Enerji Group, is setting up in Jhimpir, District Thatta a pioneering wind-power generation project of 56.4MW capacity. Construction of wind-farm and associated facilities is in advanced stage at its site.

In the first phase, five turbines each of 1.2-MW made in Turkey were installed to generate 6MW power in April 2009. Other 28 turbines of 1.8MW capacity each, supplied by Vestas of Denmark, are currently being erected. Having achieved financial close in May this year, the project is now scheduled for operation at full installed capacity in December.

Zorlu Enerji is also the first internationally-financed commercial wind-farm in Pakistan. The project, estimated to cost $158.71 million, is
being financed on the basis of 70:30 debt-equity. International Finance Corporation has extended $38.1 million, Asian Development Bank $36.8 million and the ECO Trade and Development Bank $20 million, whereas Habib Bank Ltd will provide the balance $16.2 million to cover the local project cost.

The company will sell electricity to the NTDC under a 20-year Energy Purchase Agreement (EPA) signed recently. In future, the Turkish investors also plan to increase, in phases, capacity of the project up to 200 MW.

Likewise, the FFC Energy, a project of 49.5MW capacity with an investment of $135 million, has achieved financial close in June this year.

The FFC Energy had signed in March 2010 a contract with Nordex of Germany for supply of 33 turbines each of 1.5MW. These turbines,
which are to be produced in China, will be delivered sometime in October for installation at Jhimpir. The project is scheduled to achieve COD by December this year for which sponsors have signed the first-ever Implementation Agreement in February 2011 and the EPA in April 2011.

The Fauji Foundation has shown strong commitment to developing renewable energy projects, and will set up another two similar projects with a combined capacity of 100MW in Gharo, District Thatta, under the name of Foundation Wind Energy-I (formerly Beacon Energy) and Foundation Wind Energy-II (formerly Green Power). The ADB and the Islamic Development Bank (IDB) have jointly agreed to provide $133 million to finance these two projects, whereas CapAsia of Malaysia, a private equity fund, will provide additional $20.5 million under its
Islamic Infrastructure Fund. Local financing will be supported by a consortium of local banks. The two projects are expected to come on stream in March 2013.

In 2006, the Policy for Development of Renewable Energy for Power Generation was initiated, primarily utilising wind resources. For setting up wind-farms, the AEDB has identified 50,000 acres in Sindh. The Sindh Government has already allocated 34,000 acres to the prospective IPPs in Gharo-Keti Bandar corridor near Karachi that alone has the exploitable wind-power potential of some 11,000MW. The area is most attractive to investors due to its proximity to with the main load centres and the national grid. The existing 132kv
transmission networks at Jhimpir and Nooriabad have been upgraded for dispersal of power from upcoming wind-power projects.

The wind-power policy was well received by the foreign as well as domestic investors. By August 2006, the AEDB had issued 56 LOIs for setting up projects of various capacities, later, followed by additional LOIs, totaling as many as 97. However, many firms later either proved to be fake or had lost interest in the project over time.

In January 2007, the sponsors of 15 projects backed out of having earlier accepted upfront tariff of US cents 9.5 per kWh. They declined to sign the EPA, on the plea that their input costs had meanwhile increased substantially. The NEPRA had allowed wind-power projects, in May 2006, a tariff of cents 11.75 for the first 10 years and cents 3.7 for next 10 years. Thus, the levelised tariff for 20 years of the project life was determined at cents 9.5, based on 97 per cent plant availability, 12 per cent rate of interest, debt-equity ratio of 80:20 and guaranteed 15 per cent return on equity. The tariff allowed by NEPRA was much higher compared to other modes of renewable power generation in Pakistan as well as that of wind-power in neighboring countries.

The AEDB thus missed the target of creating 700 MW cumulative capacity of wind energy by the year 2010, as envisaged in the National Energy Security Plan. Later, the NEPRA yielded to the pressures of both government and prospective investors, and revised the tariff upward.

Consequently, the NEPRA determined during April 2007 to August 2010 the levelised tariff of cents 12.1057 per unit for the Zorlu Enerji, cents 16.109 for the FFC Energy, cents 10.2852 for the Green Power, cents 11.92 for the Arabian Sea Wind Power and cents 11.87 for Dawood Power. Currently, there are 21 on-grid projects each of about 50-MW at various stages of implementation.

Out of these, 13 IPPs have submitted feasibility studies, while generation licenses have been issued to six IPPs. Gul Ahmed Energy, Yunus Energy (Lucky Cement) and Metro Power, all located at Jhimpir, are expected to achieve COD by 2013. The sponsors of Gul Ahmed and Yunus Energy have already placed orders with the Nordex Germany for purchase of 20 wind turbines each of 2.5 MW, separately for the respective projects. The New Park Energy, Tenaga Generasi, Dawood Power, Arabian Sea and Milergo Pakistan are scheduled for completion in 2014.

Wind-power is set to play a key role in meeting the future power demand of the country, though it may be costly. The need, however, remains that momentum is maintained to develop wind-power sector to its optimum potential on priority.

DAWN

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