Professional Documents
Culture Documents
IFC - Solar Developer's Guide
IFC - Solar Developer's Guide
Guide to Pakistan
IN PARTNERSHIP WITH:
Acknowledgements
This Guide was developed as part of the IFC Middle East and North Africa (MENA) Renewable Energy
Development Support Advisory program, funded by AusAid, Japan, and The Netherlands for activities in
Pakistan. The overall goal of this multi-year program is to enhance the scale up and development of renewable
and clean energy in MENA by supporting developers and investors in MENA markets, increasing overall market
awareness and understanding, and facilitating public-private dialogue.
The Guide was prepared under the overall guidance of Bryanne Tait, IFCs Regional Lead for Energy and
Resource Efficiency Advisory, Middle East and North Africa. We acknowledge the significant contributions of
Sohail Alam, IFC Energy Specialist and Alice Cowman, Renewable Energy Specialist, who has been commissioned
by IFC to carry out the desk research, drafting and interviews.
We would like to thank the Pakistan Alternative Energy Development Board, National Electric Power Regulatory
Authority, National Transmission and Distribution Company, the Province of Punjab and the Province of Sindh,
who contributed greatly to the research and study for this guide through interviews and provision of information
and documents. IFC would also like to express its sincere appreciation to RIAA Barker Gillette, Ernst & Young,
and Eversheds, who contributed to the drafting of the guide. Solar resource maps and GIS expertise were kindly
provided by AWS Truepower and colleagues from the World Bank respectively, including support from the Energy
Sector Management Assistance Program (ESMAP). Certain mapping data was obtained from OpenStreetMap,
and copyright details for this can be found at http://www.openstreetmap.org/copyright. Interviews provided by
Power Planners International and reviews by Nizam Energy added value to the final guide.
Contributing Partners
| 3
Table of Contents
INTRODUCTION AND OUTLINE
09
1. COUNTRY PROFILE
10
12
15
16
16
16
16
16
16
17
4.2.3. K-ELECTRIC
17
4.3. TRANSMISSION
17
5. TARIFF DETERMINATION
18
18
19
22
4 |
16
24
28
28
30
34
36
36
38
39
41
42
43
43
46
48
49
49
49
49
50
50
51
52
53
54
54
54
55
55
55
55
55
| 5
6 |
56
56
56
56
ANNEX 1
58
ANNEX 2
60
ANNEX 3
62
ANNEX 4
64
ANNEX 5
69
ANNEX 6
71
ANNEX 7
73
ANNEX 8
79
This Guide provides background for investors* who are implementing or intending to implement solar generating
plants in Pakistan. The Guide includes an overview of how a solar project could be developed in Pakistan and the legal
and regulatory support mechanisms for that project. It also describes legal, regulatory and other issues concerning the
preparation, agreement, approval and implementation of projects up to financial close.
*In this Guide the general term Investor is used to mean Contractor or Developer, i.e. persons who intend to
implement or who are already implementing a project to construct a solar plant in Pakistan.
Disclaimer
The International Finance Corporation (IFC), a member of the World Bank Group, creates opportunity for people to
escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting
private sector development, mobilizing private capital, and providing advisory and risk mitigation services to
businesses and governments.
This Guide was commissioned by IFC through its Middle East and North Africa Renewable Energy Program. The
conclusions and judgments contained in this report should not be attributed to, and do not necessarily represent the
views of, IFC or its Board of Directors or the World Bank or its Executive Directors, or the countries they represent.
IFC and the World Bank do not guarantee the accuracy of the accuracy of the data in this publication and accept no
responsibility for any consequences of their use.
The maps provided in this Guide are produced with the best information available to IFC, the World Bank and
AWS Truepower. Developers should not base commercial decisions on un-validated mapping outputs. The power
transmission maps for Pakistan have been obtained from OpenStreetMap (OSM), an open data resource, and in most
cases are based on visual identification of transmission lines. As a result, the mapping data is not complete, mainly
as a result of poor quality satellite imagery in certain areas of the country, especially for lower voltage transmission
lines. The information presented is therefore not a complete or accurate representation and should therefore be used
with care.
The material in this work is protected by copyright. Copying and/or transmitting portions or all of this work may be
a violation of applicable law. The International Finance Corporation encourages dissemination of its work and hereby
grants permission to users of this work to copy portions for their personal, noncommercial use, without any right to
resell, redistribute, or create derivative works there from. Any other copying or use of this work requires the express
written permission of the International Finance Corporation.
| 7
LIBOR
AJK
LOI
Letter of Intent
LOS
Letter of Support
MIGA
BOOT
CAPEX
Capital expenditure
CDM
COD
CPPA
DISCO
Distribution Company
EIA
EPA
O&M
EPC
Engineering, Procurement,
PKR
Pakistani Rupee
Construction
PPA
PPIB
PV
Photovoltic
RE
Renewable Energy
RFP
ROE
Return on Equity
ROEDC
OPEX
Operational Expenditure
USD or
FIT
8 |
Agency
M2
Square meter
MW
MegaWatt
MWh
MegaWattHour
NEPRA
NTDC
GWh/yr
IA
Implementation Agreement
IDC
IEE
IPP
IRR
US Cent
KIBOR
WAPDA
kV
Kilovolt
kWh
Kilowatt-hour
US$ or
WPI
| 9
1. Country Profile
Pakistan is a federal parliamentary republic. It has four provinces
(Khyber Pakhtunkhwa, Balochistan, Punjab, and Sindh), one capital
territory (Islamabad Capital Territory), two autonomous and disputed
territories (Azad Jammu & Kashmir and Gilgit Balistan) and the Federally
Administered Tribal Areas (FATA). It is the sixth most populous country
in the world with a rapidly growing population of over 190 million.
CHINA
Legend
Chitral
KH YB ER
PA KH T UN KH WA
6 - 25
Swat
Mohmand
Kurram
501 - 2,500
2501 - 5,000
Fr Bannu
North
Waziristan
5001 - 72,000
FATA
South
Waziristan
Zhob
Ziarat
Harnai
Barkhan
Layyah
PU N J A B
Multan
Muzaffargarh
Kalat
Dera
Bugti
Nasirabad
B A LO C H I S TA N
Washuk
Rajanpur
Jhal
Magsi
Kharan
Jaffarabad
Qambar
Shahdadkot
Khuzdar
IRAN
Dadu
Naushahro
Feroze
Khairpur
SI N D H
Sanghar
Matiari
Tando
Hyderabad Allah
Yar Mirpur
Tando
Khas
Muhammad
Khan
Karachi
City
Badin
Arabian sea
Thatta
Sahiwal
Okara
Pakpattan
Bahawalnagar
Bahawalpur
INDI A
Jamshoro
Las Bela
Vehari
Kasur
Ghotki
Kech
Gwadar
Toba
Tek
Singh
Sukkur
Shaheed
Benazirabad
Awaran
Lahore
Faisalabad
Jacobabad Kashmore
Shikarpur
Larkana
Panjgur
Rahim
Yar Khan
Narowal
Sheikhupura
Lodhran
Kachhi
Chagai
Nankana
Sahib
Chiniot
Dera
Ghazi
Khan
Sialkot
Gujranwala
Hafizabad
Bhakkar
Kohlu
Sibi
Sargodha
Dera
Ismail
Khan
Khanewal
Mastung
Nushki
Gujrat
Mandi
Bahauddin
Khushab
Tank
Musakhel
Loralai
Jhelum
Chakwal
Mianwali
Lakki
Marwat
Pishin
Quetta
Rawalpindi
Jhang
Killa
Saifullah
P.A . K
Isla mab ad
Karak
Bannu
Fr
Tank
Fr
D.i.khan
Sheerani
Abbottabad
Haripur
Nowshera
Fr Peshawar
Fr Kohat
Attock
Kohat
Orakzai
Hangu
Killa
Abdullah
Swabi
Khyber
Peshawar
AFG HANISTAN
101- 500
Shangla
Buner
Tor Mansehra
Mardan
Ghar
Malakand
Charsadda
51 - 100
Jammu
&
Kashmir
Batagram
26 - 50
As kai
Chin
Kohistan
Upper
Dir
1-5
Umerkot
Tharparkar
75
150
300 Km
Recent economic developments in Pakistan have largely been positive. In 2015, inflation declined to 4.5% and GDP
growth was 4.2%, up from 4% in 2014. Growth is expected to continue on an upward trajectory to reach 4.5% in
2016 and 5.2% from 2018 onwards. Country risk perception has improved dramatically and the Emerging Markets
Bond Index Plus risk spread for Pakistan declined from 1011bps in March 2013, to 461 bps in April 2015. Additionally,
Pakistans S&P credit rating changed from stable to positive in May 2015 and is currently rated at B-. See Annex 2 for
more fiscal information on Pakistan.
Pakistans energy sector has also undergone a number of structural reforms in the last two decades. In 1998, in an effort
to promote increased private sector participation in the market, the Pakistan Electric Power Company was formed to
unbundle the Water and Power Development Authority (WAPDA). Prior to unbundling, WAPDA together with the
Karachi Electricity Supply Company (KESC - covering only the Karachi area) generated, transmitted and distributed
all of the power in the country. In 2007, WAPDAs power function was unbundled into 10 public sector Distribution
Companies, 4 Generation Companies and the National Transmission & Distribution Company (NTDC). Following
10 |
unbundling, WAPAs remaining mandate is development of water and hydropower services in an efficient manner.1 KESC
was privatized in 2005 and is now known as K-Electric.
For the last decade or so, Pakistan has been facing a severe energy crisis. With installed generation capacity of about
23,600 MW, the country is facing a power shortage of approximately 3,000 MW to 6,000 MW during peak hours (see
Figure 2). The crisis worsens during summer months, leading to prolonged load shedding of 8 to 18 hours that varies
significantly between urban and rural areas. 37% of Pakistans fuel mix is based on fuel oil which means the cost of
generation is expensive and highly dependent on oil price changes leading to cost vulnerability. Renewables (other than
large hydro), which could lessen this cost vulnerability, contribute less than 1% of the current renewable energy mix.
For international investors, Pakistan has had a long history of successful completion of IPPs over 20 years. There are
36 IPPs with an installed capacity of 9GW in operation, and an additional 18 IPPs with an installed capacity of 5GW
are under construction. There are clear and consistent policies and regulations for IPP development and a strong and
independent regulator. There are fiscal incentives, standardized government support documents and long-term offtake
contracts on tariffs based on a cost-plus approach and feed-in-tariffs (FITs) with indexations. The contractual framework
has been stress tested over the last 20 years by events and situations including the foreign exchange crisis in 1998,
periods of political instability, contract renegotiations, persistent circular debt issues at the federal level, significant
increases in oil prices and recent sector liquidity issues. Within the renewables space, IPPs have reached financial close
in both hydro and wind and gas. International investors such as Engie, GE Capital, Oman Oil, AES Corporation, DEG
Germany and International Power UK have already successfully invested in IPPs in Pakistan financed by the IFC, Asian
Development Bank, and OPIC, among others.
30.000
25.000
20.000
(MW)
15.000
10.000
5.000
-
2010 2011
Generation Capability (MW) 12,751 13,193 12,320 14,600 16,170 18,499 18,794 20,302 23,734
Peak Demand (MW)
1 http://www.wapda.gov.pk
| 11
FIGURE 3: ANNUAL SUMS OF GHI (2000-2012) FOR PAKISTAN AND PROVINCES BASED
ON SATELLITE ESTIMATES
2400
2200
KWh/m2
2000
1800
1600
1400
1200
1000
Pakistan
Northem Regions
Sind
Balochistan
Punjab
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2104 2100 1859 2073 2111 2059 2050 2103 2088 2090 2075 2066 2149
1447 1506 1273 1382 1415 1355 1404 1545 1487 1455 1454 1523 1504
2254 2215 2049 2245 2273 2259 2215 2260 2244 2256 2225 2194 2333
2284 2260 2030 2254 2293 2247 2227 2254 2256 2252 2256 2227 2319
2112 2104 1843 2084 2123 2055 2061 2099 2086 2113 2061 2049 2156
Islamabad
1966 1997 1654 1931 2006 1897 1866 1964 1920 1966 1942 1944 2025
Fata
1996 2026 1713 1980 2020 1931 1918 1970 1961 1954 1965 1960 1997
Nwfp
1807 1869 1530 1758 1804 1728 1728 1837 1801 1778 1784 1819 1836
A comprehensive resource assessment and mapping project covering biomass, solar and wind is currently ongoing, with
a final Solar Atlas expected in early 2017. The project is being implemented by The World Bank in cooperation with the
Alternative Energy Development Board (AEDB), with funding from the Energy Sector Management Assistance Program
(ESMAP) and the Asia Sustainable and Alternative Energy Program (ASTAE). Preliminary outputs, including the Solar
Modeling Report from which the resource data above was obtained, can be found on the ESMAP website3 . The solar
mapping component includes up to two years of high quality, ground-based solar measurements taken from nine sites
across Pakistan (see Figure 4 for details of site locations). The measurement data is being published on The World Banks
Energy & Extractives Open Data Platform4 , and can be freely downloaded.
2 World Bank Group (2015). Solar Modeling Report. Available at: http://documents.worldbank.org/curated/en/2015/03/24365411/solar-resource-mapping-pakistan-solar-modeling-report
3 Available here: http://esmap.org/re_mapping_pakistan
4 Available here: https://databox.worldbank.org/initiative/renewable-resource
12 |
#
!
KYRGYZ REPUBLIC
Solar Measurement Stations *
TA J I K I S TA N
Pakistan Cities
CHINA
Major
Roads
World
Transportation
T U R K M E N I S TA N
1002 - 1580
Northern Areas
1581 - 1726
N.W.F.P.
1727 - 1844
1845 - 1946
#!
A F G H A N I S TA N
Peshawar
Azad Kashmir
#! Islamabad
1947 - 2170
F.A.T.A.
Punjab
#! Quetta
Multan
#!
Lahore
!
#
Bahawalpur
Baluchistan
#!
Khuzdar
Sind
#! Hyderabad
Karachi
90
180
360
Kilometres
540
INDIA
720
| 13
Major Roads
FiT Division Line
TA J I K I S TA N
Population
CHINA
< 250000
Transportation
250001
- 300000
!World
T U R K300001
M E N -I 450000
S TA N
!
450001 - 1000000
!
Global Horizontal Irradiance
Northern Areas
> 1000001
N.W.F.P.
kWh/m2/Year
Peshawar
Mardan
! !!
!
1002 - 1580
A F G H A N I S TA N
Taxila
1581 - 1726
1727 - 1844
F.A.T.A.
1845 - 1946
Khushab
Jhang !
Quetta
Multan
Baluchistan
Larkana
!
!
!!
!
! !
Faisalabad
Rawalpindi
Sialkot
Punjab Gujrat
!
Sargodha
1947 - 2185
Azad Kashmir
Islamabad
Gujranwala
Sheikhupura
! Lahore
Okara Kasur
!
Sahiwal
!
Bahawalpur
Sukkur
Sind
Hyderabad
Karachi
14 |
90
180
360
Kilometres
540
!
!
720
See Section 5.2 for more discussion on the North/South Solar Feed In Tariff divide
INDIA
> 1 20MW
> 20 50MW
> 50 100MW
11.5327
11.4460
11.3560
10.8920
10.8101
10.7251
In the distributed solar space, the market has also been developing. With the rising costs of electricity in Pakistan and
unreliable grid supply, more industries and commercial organizations are turning to captive solar solutions. There has
been a strong surge in domestic installation of rooftop PV panels in large cities of the country. Pakistans private sector
imported 350 MW of solar panels in 20139.
For projects under 1 MW, net metering regulations 10 came into effect on 1 September, 2015. This sector is expected
to see significant growth in the coming years, and Pakistan is targeting at least 1 million customers and adding
approximately 3000 MW of solar power through net metering.11
Under the 2006 RE Policy, solar power project developers may also enter into direct bilateral sales contracts with end-use
customers to sell part of the power generated by them to their direct customers and the rest to the utility company for
general distribution. For direct sales, they are required to pay wheeling charges for the use of the transmission/and or
distribution grid network used to transport the power from the plant to the purchaser. Until now, there are no known
solar projects in Pakistan that are selling power on a bilateral basis.
6 Found at: http://www.aedb.org/Documents/Policy/REpolicy.pdf
7 This project was developed by Quaid E-Azam Solar (Pvt) Ltd at Quaid E- Azam Solar Park
8 AEDB presentation at London 2015 conference
9 Dawn News: Solar energy to be brought into national power grid (7th January 2015)
10 National Electric Power Regulatory Authority (Alternative and Renewable Energy) Distributed Generation and Net Metering Regulations 2015 Found at: http://www.nepra.org.pk/Legislation/Regulations/NOTIFICATION%20SRO%20892%20-2015.PDF
11 AEDB presentation at London 2015 conference
| 15
16 |
4.3. Transmission
National Transmission and Despatch Company: NTDC
was organized to take over all the properties, rights and
asset obligations and liabilities of 220 kV and 500 kV
Grid Stations and Transmission Lines/Network. NTDC
operates and maintains the 500 kV Grid Stations, the 500
kV transmission line and the 220 kV transmission lines
in Pakistan. NTDC must review and approve evacuation
and interconnection studies provided by a solar developer
before a tariff for that developer can be approved and a
grid connection agreement can be signed. A line map of the
transmission network is included at Annex 8.
| 17
5. Tariff Determination
5.1. Tariff Process Overview
The 2006 RE Policy sets out three methods for tariff determination for
grid connected utility scale renewables:
Competitive bidding (solicited proposals)
Direct negotiations for a cost-plus tariff (unsolicited proposals)
FIT setting (known in Pakistan as an upfront tariff)
Unless it is a solicited competitive bid, NEPRA determines the level of tariff. The upfront tariff determination is a fixed
tariff price determined by NEPRA with terms and conditions attached. Essentially, it is what is known internationally as
a FIT and is referred to as such in this document. The FIT process is in the focus of this document. Although the other
two methods are theoretically possible, they have not yet been used for the purposes of grid-connected, utility scale solar
power projects.
FIT PROCESS
NEPRA will publish a notice of a FIT determination and any interested stakeholder may file a notice to intervene. The
notice is usually accompanied by a draft FIT proposal. Interested parties may attend the hearing and submit amendments
or proposals in relation to the suggested FIT. NEPRA will listen to the proposals and arguments at the hearing and will
determine a FIT after taking these arguments into account. There have been three FIT determinations for solar so far,
with the latest in December 2016. NEPRA determines the FIT on the basis of a number of principles, which are set out in
the NEPRA Tariff Standards and Procedures Rules 1998.
In general, NEPRA assigns value to the project costs that developers would incur e.g. capex, opex, depreciation, finance
costs (including interest and principal) and insurance, etc., and incorporates an assumption on a rate of return to the
developer. The FIT is calculated on that basis and although the financial model NEPRA uses is not publically available,
the component figures upon which its assumptions are based for calculation of the FIT are provided publicly in NEPRAs
determination. Once the FIT final order is determined by NEPRA, parties may file motions for recalculation and review.
NEPRA may review the FIT at its discretion.
Once the FIT is determined/approved, developers may apply for that FIT within 6 months of the date of publication of
the tariff in the government official gazette 25 and financial close must be achieved by the developer within a period of
time of acceptance as determined by NEPRA and further described in Section 6. Decisions on tariffs are also published
by NEPRA on its website.26
As has been the case in many other renewable energy programs, the Pakistan FIT for solar power projects has been
declining since it was first announced in 2014, in line with international trends. This is to be expected (see Figure 6). A
FIT that is set too high can be unsustainable in the long term.
25 Pursuant to section 31(4) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (XL of 1997) - Developers can subscribe to the government gazette here: http://
en.io.gov.mo/Services/Official-Gazette-Subscription.aspx
26 http://www.nepra.org.pk/tariff_upfront.htm
18 |
35
31.5
30
25
20
18.5
16-9
13.5
15
10
10
16-17 14-15
10.7 - 11.5
10.4
6-7
5
0
South Africa
(Comparative Procurement)
Round 1
Round 2
Jordan
(Round 1 = FIT,
Round 2 = Competitive)
Pakistan
(Wind FIT)
Pakistan
( Solar FIT)
Round 3
Kyber Pakhtunkhwa
Islamabad Capital Territory
Azad Kahsmir & Jammu, Gilgit-Baltistan)
Balochistan
Southern Pakistan
Sindh
Southern Punjab (including Cholistan)
| 19
> 50 MW 100 MW
>20 MW 50 MW
>1 MW 20 MW
EPC Costs
1,034,000
1,054,680
1,075,360
1,071,431
1,092,859
1,114,288
Land
23,810
23,810
23,810
36,658
38,490
40,320
10,714
9,107
7,429
Capex
1,142,613
1,164,266
1,185,846
Financing
Financing Fees & Charges
29,994
30,562
31,128
21,334
16,043
10,565
Subtotal
51,328
46,605
41,693
1,193,940
1,210,871
1,227,540
NEPRA recognizes that a large amount of the project will be contracted from abroad. The reference exchange rate is
PKR 105/US$. Since the exact timing of payment to the EPC contractor is not known at the time of tariff determination
by NEPRA, under the 2016 Tariff, an adjustment for relevant foreign currency fluctuation for 90% of the foreign
component of the EPC contract price will be allowed against the reference exchange rate on the basis of monthly average
exchange rates prevailing on 1st day of each month during the construction period . The developer is required to provide
all the necessary relevant details along with documentary evidence. The adjustment shall be made only for the currency
fluctuation against the reference exchange rate. See Annex 3 for more details on the indexation mechanism.
20 |
DEBT
In calculating the tariff, NEPRA allows different premiums depending on whether the solar developer uses foreign
or local debt. Under the 2016 Tariff, the foreign debt allowed is London Inter Bank Offered Rate (LIBOR), 0.31%,
plus a premium of 4.5% for foreign loans. The local debt is Karachi Interbank Offered Rate (KIBOR), which as of
28th December 2015 was 7..32% , plus 3% on quarterly basis, as shown in Table 4. If there are any savings in the
premium, these will be shared between the developer and the purchaser (60:40). The interest on the fixed loan will
remain unchanged unless there is a variation in the 3-month LIBOR. Each quarter, if there is a variation in LIBOR,
an adjustment to the interest portion of the tariff may be made. This adjustment can be positive or negative. The
mechanism for this indexation is set out in Annex 3.
The tariff assumes a debt-to-equity ratio of 75:25, a loan tenor of 10 years, and quarterly repayments.
Local Debt
10
10
Repayment (Qtrly)
LIBOR
0.31%
KIBOR (actual)
7.32%
Spread
4.50%
3.00%
4.81%
10.32%
CONSTRUCTION PERIODS
NEPRA determined that the targeted maximum construction period after financial close is 8 months, 10 months and
12 months for >1MW20MW, >20MW50MW and >50MW100MW projects respectively. No adjustment will be
allowed in this tariff to account for the financial impact of any delay in project construction. However, the failure of the
developer to complete construction within the stipulated time will not invalidate the tariff granted to it. See Section 6.3.1
for more discussion on construction periods in the context of the project documents.
RETURN ON EQUITY
The return on equity has been set at 17% before taxes for every tariff determination by NEPRA. After Commercial
Operations Dated (COD), the Return on Equity (ROE) component of the tariff may be quarterly indexed on account of
variations in the PKR/US $ exchange rate. The formula for this is set out in Annex 3.
INSURANCE AND SINOSURE FEE
A portion of the EPC costs is allowed for insurance during construction as set out in Table 3 above. Insurance during
construction will be re-established on the basis of actual project financing and weighted average quarterly LIBOR/
KIBOR and applicable premiums, 4.5% and 3% respectively. Any savings in premium must be shared in the ration of
60:40 between the power purchaser and the developer.
During the operation period, an actual insurance cost of a maximum of 1% of the EPC cost may be charged to the
power purchaser. The actual insurance cost for the minimum coverage required under contractual obligations with the
off-taker not exceeding 1% of the EPC cost is be treated as a pass-through 28. The insurance component of reference
tariff shall be adjusted annually as per actual upon production of authentic documentary evidence. The formula for
calculation of this insurance adjustment is set out in Annex 3.
27 Note that the KIBOR figure here is an assumed figure from December 2016. This may be adjusted to the actual KIBOR.
28 Pass- through items are discussed in more detail in Section 6.3.1 below.
| 21
A number of large-scale projects are seeking funding from Chinese financial institutions and a condition for financing
these projects is that financial institutions are required to obtain coverage from the China Export Credit & Insurance
Corporation (Sinosure) for specific risks. NEPRA has decided to allow the Sinosure fee for the solar power projects
under the upfront tariff. A Sinosure fee of 7% of the total debt servicing may been included in the project cost. Project
cost will be adjusted at the time of COD on the basis of the actual Sinosure fee subject to a maximum of 7% of total
debt servicing may be passed through as a cost to the power purchaser under the tariff.
TAXES
Up to 2016, there was an allowed taxes and duties rate in the EPC component. This was US$ 47,365/MW and could be
adjusted as per the actual rate at the time of COD stage adjustment of the tariff on the basis of verifiable documentary
evidence. This was not mentioned in the 2016 tariff and the adjustment would not seem to apply any longer.
The 2016 determination does state that if the Project Company is obligated to pay any tax on its income from generation
of electricity or any duties and/or taxes, not being of a refundable nature, are imposed upon the company, the exact
amount will be reimbursed by CPPA/DISCO on production of original receipts. See Section 8 below for more details on
taxes.
> 20 50MW
> 50 100MW
US cent/ kWh
US cent/ kWh
US cent/ kWh
O&M
1.7823
1.7826
1.7823
Insurance
0.7483
0.7338
0.7194
ROE
3.7058
3.7054
3.7029
PKR/US $
7.8242
7.7179
7.6100
14.0604
13.9394
13.8146
6.2363
6.2215
6.2046
11.5327
11.446
11.356
Category
Levelized Tariff
Indexations
> 1 20MW
> 20 50MW
> 50 100MW
Indexations
US cent/ kWh
US cent/ kWh
US cent/ kWh
O&M
1.6832
1.6832
1.6832
Insurance
0.7067
0.6930
0.6795
ROE
3.4999
3.4995
3.4971
PKR/US $
5.0022
4.9343
4.8652
13.2792
13.1650
13.0470
5.8898
5.8758
5.8598
Levelized Tariff
10.892
10.8101
10.7251
22 |
80%
90%
Above 19%/20%
100%
The sharing is subject to a maximum of 19% (North) 20% (South). This maximum is set to encourage developers to use
the most efficient equipment possible. These payment adjustments are calculated on a yearly basis. For further, discussion
on this and shortfall energy below benchmark capacity factors in any given year, see Section 6.3.1 below.
| 23
24 |
STAGE
TIMELINE
LOI TO LOS
GUARANTEE
AEDB/Provincial Goverments
Provincial Governments may assist with the
identification of public lands. AEDB may assist
with identification of private lands.
STEPS
Identification of Lands
Developer must work with Provincial Governments,
AEDB or private parties to identify land.
DEVELOPER
GOVERNMENT AUTHORITY
1 TO 2 MONTHS
Legal Fee:
$20,000 - $100,000
12 MONTHS
Letter of Credit:
$35/kW
START
STEP DESCRIPTION
12 TO 18 MONTHS
Developer posts
performance
guarantee
within 15 days of
tariff approval.
AEDB
Issues LOS
within 7 days.
Developer
applies for
consents.
NEPRA &
State Bank of
Pakistan &
Ministry of
Commerce/
Federal Board
of Inland
Revenue
issue consents.
FINANCIAL
CLOSE
29 This process map only applies to developers working through AEDB from the LOI stage. If a developer obtains an LOI from a provincial agency, there may be differences in
processes and timelines up to the issuance of the LOS.
27 |
30 Amendment to the 2006 RE Policy May 2015. This contrasts with the procedures in the Punjab Power Generation Policy 2006 (as amended in 2009)
| 28
Negotiation/Finalization
of Project Agreements (IA, PPA)
Financial Close
(within 15-12 months of issuance of LOS)
6-9
Months
12-15
Months
Review of Application
by a Panel of Experts
Approval of LOI
Issuance of LOI
Establish SPV
18
Months
Negotiation/ Finalization
of Project Agreements (IA, PPA)
12-15
Months
Financial Close
(within 12015 months of issuance of LOS)
31 There is some ambiguity as to whether the LOS issued by Punjab can be different to the standard document issued by AEDB. The PPDB has suggested that their timelines are more aggressive and
that 6 months is required for financial close. AEDB is clear that once there is a tripartite LOS (i.e. where a government guarantee is required) their standard LOS is used and the guarantee is issued in
favour of AEDB and not the provincial government.
| 29
30 |
| 31
##
Azad Kashmir
Mardan
Peshawar
#
# #
#
#
##!
Taxila
N.W.F.P.
Islamabad
!
Rawalpindi
!
##
F.A.T.A.
#
#
#!
Khushab
!
Jhang
# Gujrat
#
#!
#!#Sialkot
#
Sargodha
Faisalabad
# #
#
Multan
# #
##
Gujranwala
#
# !#Sheikhupura
###
#
#!#Lahore
#
###
#
#
###
#
#
#
Kasur
#
!
#
#
#
#
Sahiwal
Baluchistan
Okara
#
##
Bahawalpur
OpenStreetMap
Power sub-stations
FiT Division Line
Transmission Lines
No voltage dened
110 KV
132 KV
220 KV
#
# ###
500 KV
Sind
kWh/m2/Year
1002 - 1580
1581 - 1726
1727 - 1844
0 25 50
100
Kilometres
32 |
150
200
1845 - 1946
1947 - 2185
#
#
#
# # ##
#
#
Sukkur
!
!
Larkana
#
#
Sind
Baluchistan
#
# #Hyderabad
# !#
#
# ##
!#
### #
Karachi
Power sub-stations
Renewable Energy
Stations
Transmission Lines
No voltage dened
110 KV
132 KV
220 KV
500 KV
1727 - 1844
0 15 30
60
Kilometres
90
1845 - 1946
120
OpenStreetMap
1947 - 2185
| 33
PRIVATE LANDS
Developers may also negotiate directly with landowners for private lands. Developers may find these lands themselves or
approach the AEDB. As the AEDB has no jurisdiction over provincial lands, it encourages developers to purchase lands
through private treaty. The AEDB has worked with NTDC to identify a number of sites or areas near to substations that
could be developed. The AEDB has identified private sites close to transmission lines in Balochistan, KPK, Sindh and
Punjab. Each of these sites can take a maximum of 200-300 MW. The AEDB is encouraging projects to stay below 50
MW so that they can utilize the 132 kV network and that NTDC will not need to build large transmission lines purely
for the evacuation of solar power as it was required to for the 1000 MW QA Solar Park in Punjab. The estimated market
rate for private lands is between $1000 and $4000 an acre. Approximately 10 developers have been able to purchase
lands under this procedure.
Contact Information for the AEDB:
Irfan Yousuf
AEDB
2nd Floor, OPF Building,
Shahra-e-Jumhuriat, G-5/2,
Islamabad.
Tel: +92 51 9241288; +92 22360-61
Mob: +92 300 5220122
6.1.3. THE AEDB LOI APPLICATION PROCESS
It takes approximately two months to secure an LOI. The AEDB will begin processing the LOI even if exact lands have
not been identified. To obtain an LOI, a set of documents referred as the proposal in the 2006 RE Policy must be
submitted by the sponsor. The proposal package should include the following, at a minimum:
i. A Statement of Qualification of the project sponsors along with relevant corporate and sponsor profiles, plus proof of
financial capacity to undertake the project.
ii. List of relevant corporate experience of the project sponsor(s).
iii. Proposed project location with GPS coordinates. The project site has to be located in an area with no adverse
environmental effects. This site location can be changed at a later stage.
iv. Proposed net installed capacity (MW) and expected annual energy output (MWh) based on solar resource available at
the site
v. Proposed basic outline of plant and structures
vi. A brief summary of the project implementation plan covering proposed milestones for project preparation,
implementation and completion date. This plan may include aspects in relation to technology, human resource and
project financing options.
vii. Estimated distance of the grid from the proposed site and the estimated distance from the nearest 132 kV or 11 kV
line and the grid station.
viii. An indication of land availability/acquisition for the proposed project, which will be secured before the expiry of the
LOI.
The soft copy of the complete proposal can be emailed to the AEDB at: [email protected] or it may be provided
directly to Solar Section, Alternate Energy Development Board, 2nd Floor, OPF Building, Shahrah-e-Jamhuriat, G-5/2,
Islamabad, Pakistan. Tel: +92 051 9222360 - 61.
34 |
33 http://www.aedb.org/index.php/component/judownload/19-solar-standard-docs/36-standard-format-loi?Itemid=101
| 35
T0
Sponsor(s))
Support (LOS)
Issuance of Letter of Support (LOS) by AEDB
In case the developer fails to meet the LOI Milestones or perform any other obligations set forth in the Policy and this
LOI, including the extension of the date of expiry of the bank guarantee as provided herein, the AEDB will terminate this
LOI and encash the bank guarantee.
Provided the developer meets the LOI Milestones on the stated dates, the Expiry Date of the LOI shall be extended on
a day-for-day basis for the number of days of delay by which the approval or review by the relevant public sector entity
listed in the LOI Milestones is delayed beyond the corresponding period stated in the LOI Milestones.
36 |
dqMKjtNPLJeKk6DeufbJDALQ&bvm=bv.106923889,d.bGg
36 The committee is made up of members from the Energy Department, Finance Department, the
Board of Revenue, Punjab Board of Trade and Investment, a nominee of the district concerned,
38 The Notification of Conditions is ambiguous with regard to when the lease is executed.
including Cholistan Development Authority and the Managing Director of the Punjab Power
Development Board.
11th June 2015 for grant of land for the purpose of producing energy from renewable resources
| 37
40 Exact market rates are difficult to come by but are in the range of US $1000 to US $4000 per
acre per year.
41 Sindh Land Revenue Act 1967.
42 Security interests may be created in favour of lenders upon recommendation of the energy
department
38 |
| 39
Fees (US $) 43
Up to 1 MW
384
> 1 MW up to 10 MW
768
> 10 MW up to 20 MW
1,151
> 20 MW up to 50 MW
1,535
> 50 MW up to 100 MW
1,919
Above 100 MW
3,838
43 The exchange rate used for the purpose of this guidebook is PKR 105/ US$
44 The exchange rate used for the purpose of this guidebook is PKR 105/ US$
45 There are various generic guidelines on the SECP website (http://www.secp.gov.pk/CLD/
cld_guides.asp) and some specific ones (http://www.secp.gov.pk/Guides/PromotersGuideinEnglishdec022010.pdf) but please note that they may be outdated.
46 NEPRA application and processing fees are indexed with the CPI and subject to marginal
changes. The reference is based on the September 2008 CPI.
40 |
Fees (US $)
Up to 1 MW
192
> 1 MW up to 10 MW
479
> 10 MW up to 100 MW
960
Above 100 MW
1,919
Once the developers apply for the FIT, they cannot apply
for a cost-plus tariff and may risk losing any guarantees or
payments unless otherwise agreed to with the authorities.
Therefore, developers should determine their appetite for
risk and any associated project risks before applying for a
FIT.
The FIT application in triplicate should be filed to
Registrar NEPRA at following address:
The Registrar - National Electric Power Regulatory
Authority
NEPRA Tower Attaturk Avenue (East), Sector G-5/1,
Islamabad Pakistan.
Email : [email protected]
Tel: +92 51 9206500
Fax: +92 51 2600021
Developers should note that the decision to opt for the
upfront tariff once exercised is irrevocable.
47 http://epd.punjab.gov.pk/system/files/REVIEW%20OF%20IEE%20AND%20EIA%20REGULATIONS%2C%202000.doc.pdf
48 The application form is standard and the review fees vary from US $140 to US $280 depending on the size of the project.
| 41
LOS
The LOS is signed by the main project sponsor and the
AEDB. If the LOI has been issued by a provincial agency,
the provincial agency also signs the LOS. The project is
then governed by the LOS along with the EPA and IA
(together the LOS Project Agreements). The LOS takes
precedence over the EPA and IA in case of any conflict. The
LOS will be issued by the AEDB within seven days of the
posting of the PG, provided the developer has a generation
license. A sample LOS can be found at the AEDB website49
and is contained in Annex 4 of this document.
FEES
Non-refundable processing fees of up to US$ 100,000 for
projects above 50 MW, US$ 50,000 for projects from 6
50 MW and US$ 20,000 for projects from 1 5 MW shall
be charged at the time of signing the LOS. These must be
paid within one month of signing the LOS.
TERM OF THE LOS
The validity of the LOS is the earlier of (i) achievement
of financial close or (ii) one year from the date of
determination by NEPRA, called the Required Financial
Closing Date (RFCD). If the AEDB determines that any
49 At: http://aedb.org/index.php/ju-elibrary/elib-solar/solar-standard-docs
42 |
Take or Pay
The EPA is a take or pay agreement. The Seller is paid for all net electrical output delivered, as measured by
the meter. Payments are made for net electrical output that would have been delivered but for curtailment or
specific dispatch instructions (i.e. deemed output).
Contract Capacity
The Seller must state its Contract Capacity in MWp DC. The Seller may, where necessitated by unforeseen
circumstances, reduce the installed capacity before the Commercial Operations Date by a maximum margin of
%10 of the Contract Capacity.
Required Commercial
This is negotiated by the Seller with the AEDB with the following limitations: 8 to 12 months for 1 to 20 MW, 10 to
Operations Date
Letter of Credit
A Letter of Credit (LOC) in the amount of US 35$ per kW of the Contract Capacity must be delivered to the
Power Purchaser prior to Financial Close. The LOC must be maintained in full force and effect and will not
be returned to the Power Purchaser until COD (unless terminated prior to COD, in which case the LOC must
be maintained until 30 days after such termination). The LOC may be drawn on if the Seller has not paid the
liquidated damages prior to COD, as set out in the Liquidated Damages (LD) section below.
The LOC may also be encashed in full if there is a Seller Event of Default prior to COD.
Liquidated Damages
50 http://www.aedb.org/index.php/ju-elibrary/elib-solar/solar-standard-docs
51 Capitalized terms not defined here will be defined in the standard EPA available on the AEDB website
52 NEPRA had previously determined that the construction period was 8, 10 and 12 months fro projects of 1-20 MW, 20 to 50 MW and 50 to 100 MW respectively. However, these longer periods are
provided in the EPA to accommodate NTDCs concern regarding the proximity and availability of the Grid, given the requirement for it to complete the project interconnection works 60-90 Days before
the Commissioning Tests That would have left only 5-9 months if the construction period stipulated in NEPRAs Tariff Determination is strictly followed (which was not the intent of NEPRA).
| 43
Term
Operations and
The developer must maintain an operations and maintenance (O&M) fund. The Reserve Fund shall be funded by
Maintenance Fund
the Seller out of retained earnings commencing on the date that the first Energy Payment is received. On the
date of each Energy Payment receipt, one thirty-sixth (36/1th) of the annual O&M budget for the Complex will be
deposited into the Reserve Fund until a reserve equal to nine such deposits has been established.
The Reserve Fund is to ensure that the developer has sufficient funds available for major maintenance expenses.
Major Maintenance Expenses means expenses for an item of maintenance or repair of the Complex which
would require substantial expenditure and which is anticipated to be performed in accordance with the
manufacturers determinations, sound engineering practices or Prudent Utility Practices, but which is not
expected to be performed on a recurring basis. The developer can draw on the Reserve Fund only to the extent
it lacks other funds available for paying maintenance and associated operating expenses with respect to the
facility, or to pay for alterations, repairs, improvements, renewals and replacements necessary for the proper
operation of the facility. It has to replenish if and when it uses such expenses.
This Reserve Fund is not required if the developer has entered into a Long-Term Major Maintenance Services
Agreement with a reputable O&M contractor
Pass-Through Items
The Purchaser shall pay the Seller, any amount for the Pass-Through Items evidenced in accordance with the
and Supplementary
EPA. PassThrough items are contained in Schedule 1 to the EPA and are standard and set out below.
Tariff
(a) Payments by the Seller into the Workers Welfare Fund and the Workers Profit Participation Fund53 for its
employees required to be paid in relation to the Project pursuant to the Laws of Pakistan;
Sales tax, excise duty or any other taxes, duties, levies, charges, surcharges, or other governmental impositions
(including without limitation export tax, octroi, rawangimahsool etc.) wherever and whenever payable on the
generation, sale, exportation or supply of electricity or electricity generating capacity by the Seller during the
Term, provided that the Seller has not been previously compensated fully for any such item by the Purchaser
or by the GOP;
(b) Sales tax, excise duty or any other taxes, duties, levies, charges, surcharges, or other governmental
impositions (including without limitation export tax, octroi, rawangimahsool etc.) wherever and whenever
payable on the generation, sale, exportation or supply of electricity or electricity generating capacity by the
Seller during the Term, provided that the Seller has not been previously compensated fully for any such item by
the Purchaser or by the GOP;
(c) The cost of the Metering System if not procured by the Purchaser;
(e) Any upgrade to the protective devices of the Complex required by the Power Purchaser; and
(f) The cost of the DPLC or Fiber Optic System including OPGW/ADSS, SDH/PDH unit along with all the related
in-door and out-door equipment, as provided in Section 7.7(a)(iii) of the Energy Purchase Agreement.
Each invoice for the Pass-Through Items delivered to the Purchaser must be accompanied by the original
invoices or payment receipts for which the Seller seeks recovery from the Purchaser.
A supplementary tariff is permitted when:
There is a change in law resulting in a material change in cost or revenue. Any modifications or expenditures
required to comply with the change in law are reimbursed through a supplemental tariff.
If the plant is restored, the cost is permitted as a supplemental tariff.
Purchaser Delayed
There is compensation payable by the Purchaser if there is a delay in commissioning caused by the Purchaser.
Commissioning
The Purchaser shall pay to the Seller monthly, in arrears, the interest component of the tariff plus %50 of the
O&M Component and %50 of the Insurance Component multiplied by the Average Daily Energy for each Day
during the period of such delay.
If the delay continues for 60 days, the Purchaser is required to pay the debt when it falls due. If commissioning
subsequently occurs, the payments made by the Purchaser to service any principal debt shall be recovered
together with interest at KIBOR plus %3.5 per annum (on the monthly outstanding balance of such amounts)
commencing on the date of such payments by the Purchaser and ending on the date of complete repayment
thereof by the Seller through successive deductions of the ROE Component from the monthly Energy Payments
until such amounts have been completely recovered.
53
53 The Workers Welfare Fund is a fund established pursuant to The Workers Welfare Fund Ordinance, 1971 for the purposes of providing facilities to workers.
44 |
54
Term
Purchaser Step-In
Force Majeure
There are a number of Force Majeure events outlined in the agreement: Any event beyond reasonable control
of either Seller or Purchaser, including an Act of God
Natural Causes
Strikes
Lapse of Consents
Change in Law
Pakistan Political Event (PPE)
If there is a force majeure event that results in material damage/material modification greater than the
threshold amount, the Seller will be compensated for restoration less any insurance proceeds and less the
threshold amount. The costs will be reimbursed via an increase in the tariff.
Event of Default
54 Minimum threshold amount is greater than (a) $5,000/MW or $100,000 for a single event or (b) greater than $20,000/MW or $250,000 aggregate in a year.
| 45
Term
Lender Step-In
Termination
In the event of a termination of this Agreement prior to the Commercial Operations Date for any reason other
Payments
than a Seller Event of Default, the Purchaser shall reimburse the Seller for all costs and expense (including
reasonable attorneys fees) relating to the Project incurred by the Seller prior to such termination, which amount
in any event shall not exceed the Rupee equivalent of one hundred and fifty thousand Dollars (150,000$).
For termination payments that may arise under the EPA in favor of the Purchaser prior to COD, please see the
LOC section above.
All other termination payments are provided for in the IA.
Excess Energy
On a yearly basis, the annual electrical output of the generator is calculated based on the benchmark capacity
factors (%17 for North and %18 for the South in 2016 tariff). If annual electrical output is in excess of this, a
reduced tariff may apply as per the relevant NEPRA tariff determination. See Section 5.3 for more details on this
in relation to 2016 tariff.
Parties
Project Company (the Seller) and GOP. It is negotiated by the AEDB on behalf of GOP.
Term
Title Protection
If the Seller has leased land from the provincial government, GOP indemnifies the Seller from any losses arising in
connection with or relating to any defect in title that impedes or delays the project.
Taxation of the
During the Term, the Seller shall not be subject to taxation in Pakistan on its profits and gains derived from sale
Project Company
of electricity under the Energy Purchase Agreement, including payments made by the GOP to the Seller under
Section 15.1 (Compensation upon Termination). Any change in this shall not give rise to a breach or default of
the GOP so long as such change results in a Change in Tax and can be treated as a Pass-Through Item under the
EPA.
Taxation of the
Local investors will be taxed according to the laws of Pakistan and Foreign Investors will be taxed according
Investor
to the Bilateral Tax Treaty with their country. If no tax treaty exists, they are taxed according to the laws of
Pakistan.
Right to Import/
The Seller and its Contractors shall be entitled to import without restriction and shall be exempt from (or
Customs Duties
shall enjoy a reduced rate of) Customs Duty and Sales Tax on plant, machinery, equipment and spare parts,
and replacements required to be imported for the design, construction, completion, operation, repair and
maintenance of the solar plant56 and any other item or items of plant, equipment or machinery that are
incorporated into the solar plant or whose use is dedicated to the operation and/or maintenance of the solar
plant approved by the AEDB and concurred to by the Federal Board of Revenue. Any charge in excess of that
which is law at the time of signing can be treated as a Pass-Through Item under the tariff.
Provided customs Duties and Sales Taxes are paid, all imported items will be cleared for release from customs
within 15 business days of arrival at the port of entry.
The agreement guarantees full currency convertibility provided the request is made 15 days in advance of
need. Consents from the State Bank of Pakistan to foreign currency accounts must be obtained. There are also
provisions on free transfer and repatriation of certain funds including equity.
55 Any capitalized terms in this section not defined in this document will be defined in the standard IA available on the AEDB website.
56 As provided in the Finance Act, 2014, the Fifth Schedule to the Customs Act, 1969 and the Sixth Schedule to the Sales Tax Act, 1990. See Section 8 for more details on taxes that apply.
46 |
Term
Payment Guarantee
Force Majeure
There is compensation on termination for Force Majeure. The affected party is under an obligation to incur
reasonable sums of money to mitigate the effects of the Force Majeure. However, GOP will not be allowed to
claim relief of its obligations under the IA or the Payment Guarantee if there is a Political Force Majeure or a
Change in Law Force Majeure.
Restrictions on Share
Under the IA, there are a number of lock-in periods for investors. The initial shareholder cannot reduce its
Transfer
shareholding below %51 prior to COD. The lead investor cannot reduce its shareholding below %20 prior to COD.
Post COD, AEDB consent is required for any share transfer. However, the IA states that this will be granted
unless AEDB determines that such transfer is contrary to national security interest.
Consents
The Implementation Agreement requires a number of consents from various government agencies, which must
be procured by the Seller prior to Financial Close. These include:
State Bank of Pakistan consent to conduct transactions in foreign exchange;
State Bank of Pakistan commitment to make available foreign currency if required;
NEPRA consent to the Power Purchaser to off-take the electricity (required under the generations license); and
Ministry of Commerce/Federal Board of Revenue import permits.
These consents are relatively straightforward to obtain. If there is a delay in obtaining these consents through no
fault of the Purchaser, an automatic extension of the LOS is given by the AEDB.
Compensation on
The IA contains compensation on termination of the EPA. The compensation varies depending on the
Termination
termination event. The key termination events and the compensation applied is outlined in the table below. Note
that the amount of debt, equity and ROE payable in any of the termination events reduces throughout the Term
and debt includes the interest owed to the Lenders. The mechanism for calculating each of these is detailed in
the EPA.
Termination Event
Compensation
Change in Law
Pakistan Political Event (PPE)Purchaser Termination
PPE greater than 180 days
Seller termination
Seller Event of Default
| 47
48 |
| 49
50 |
K-Exim
ADB
IFC
IsDB
Project: Construction
operation, and
maintenance of a 147 MW
run-of-the-river
hydropower plant.
Debt (%75)
Implementation
agreement
Water usage
agreement
Regional Govts.
Equity (%25)
K-Water*
Guarantee
Implementation
Govt. of Pakistan
Agreement
NTDC
Power
Purchase
Agreement
58 http://web.worldbank.org/
| 51
Member Country
Concession Agreement
Ongoing obligations
Upon termination,
Government owes (inter alia)
Termination Payment to
Project Company
Project Agreement
Reps and warranties
Covenants
Indemnity Agreement
World Bank
(Guarantor)
Project Company
(Borrower)
IBRD/ IDA
Guaranteed Loans
Commercial Lenders
(Beneficiaries)
Risk coverage: PRGs can cover a range of risks relating to government performance including changes in law, failure to
meet contractual payment obligations, obstruction of an arbitration process, expropriation and nationalization, foreign
currency availability and convertibility, nonpayment of a termination amount or an arbitration award following a
covered default, and failure to issue licenses, approvals, and consents in a timely manner.
In Pakistan, the World Bank has provided two PRGs so far. One is for the landmark IPP Hubco Power Project of 1,292
MW provided in 1995. The coverage was US $240 million against the total project cost of US $1.5 billion. Another
project was the 560 MW Uch Power project in 1996, which received a PRG for US $67 million.
59 http://www.adb.org/sites/default/files/publication/27786/pak.pdf
52 |
Political Risk Guarantees (PRGs): To cover political risk, the ADB offers a PRG designed to facilitate co-financing by
providing financing partners with coverage against specifically defined political or sovereign risks. Investors are covered
through Political Risk Guarantee for the following events:
a.Transfer restriction;
b. Expropriation;
c. Political violence;
d. Contract disputes; and
e. Non-honoring of a sovereign obligation or guarantee.
Like MIGA, the ADBs PRG is designed to facilitate private sector development, either through public or private sector
projects. PRGs are well suited where commercial lenders are prepared to accept the commercial (or credit) risks of a
project, but not the political risks. The amount that the ADB will guarantee in relation to any one project or transaction
will vary depending on a wide variety of factors, including the ADBs assessment of risk and applicable country exposure
limitations. At the upper limit, however, the ADB may guarantee up to 40% of the total project cost (in case of project
finance transactions) or US $400 million, whichever is lower. These upper limits will not apply if the ADB is protected
in the relevant transaction by a counter-guarantee given by the member countrys government. Limits lower than those
set out above will apply where the ADB has exposure to the project or transaction through direct financing instruments
e.g., loan, equity, or credit guarantee.
Partial Credit Guarantees (PCGs): The ADB provides partial credit guarantees (PCGs) to lenders of most forms of debt.
These include commercial bank loans, loans made by shareholders, loans guaranteed by shareholders or third parties,
capital market debt instruments, bonds, financial leases, LOCs, promissory notes, and bills of exchange.
PCGs cover nonpayment by the borrower or issuer on the guaranteed portion of the principal and interest due. This
guarantee product is principally applied to financial services and capital markets (e.g., banking, leasing, insurance, and
funds); and infrastructure (e.g., power, transportation, water supply and waste treatment, and telecommunications).
Partial credit guarantees can be applied to loans or other debt instruments issued by private and public sector projects
(limited recourse financings), PPPs, corporates, and (sub) sovereign entities.
| 53
Rate
TY16
32%
TY17
31%
TY18
30%
60 http://www.adb.org/sites/default/files/publication/27786/pak.pdf
61 Clause 11A(5), Part IV, Second Schedule, Income Tax Ordinance, 2001
62 Turnover tax is defined in section 113 of the Income Tax Ordinance, 2001.
54 |
| 55
9. Challenges and
Recommendations
The major issues identified with the input of various developers,
observations from FIT determination in addition to industry norms are as
per below:
56 |
| 57
Annex 1
REFERENCES
LEGISLATION AND REGULATION
Policy for Development of Renewable Energy Generation, Government of Pakistan, 2006 (the 2006 Policy)
Available at: http://www.aedb.org/Documents/Policy/REpolicy.pdf
National Electric Power Regulatory Authority (Alternative and Renewable Energy) Distributed Generation and Net
Metering Regulations, 2015
Available at: http://www.nepra.org.pk/Legislation/Regulations/NOTIFICATION%20SRO%20892%20-2015.PDF
National Electric Power Regulatory Authority Licensing (Application and Modification Procedure) Regulations, 1999
Available at: http://www.nepra.org.pk/Legislation/Regulations/NEPRA%20Licensing%20(Application%20%20Modification%20Procedure)%20Regulations%201999%20along%20with%20all%20amendments.pdf
NEPRA (Tariff Procedures and Standards) Rules 1998
Available at: http://www.nepra.org.pk/Legislation/Rules/NEPRA%20(Tariff%20Standards%20and%20Procedure)%20Rules%201998%20along%20with%20all%20amendments.pdf
Grid Code Addendum No. II for Grid Integration of Photovoltaic (PV) & Concentrated Solar Power (CSP) Plants.
Available at:
http://www.nepra.org.pk/Legislation/Codes/Grid%20Code%20Addendum%20No.II%20(NTDC)%2030-06-2014.PDF
Review of IEE and EIA Regulations 2000
Found at: http://epd.punjab.gov.pk/system/files/REVIEW%20OF%20IEE%20AND%20EIA%20REGULATIONS%2C%202000.doc.pdf
58 |
LAND
Statement of Conditions for land allocation and land lease for Solar Power Projects in the Punjab 9th May 2014. Available at: http://energy.punjab.gov.pk/downloads/QASP_LANDALLOCATION_SOC_09122014.pdf
Land Grants Policy for Solar and Alternative Energy in Sindh, 11th June 2015.
Available at: Annex 7 of this document
WEBSITE
Alternative Energy Development Board: http://www.aedb.org
National Electric Power Regulatory Authority: http://www.nepra.org.pk
National Transmission and Despatch Company: http://www.ntdc.com.pk
Sindh Energy Department: http://sindhenergy.gov.pk
Punjab Energy Department: http://energy.punjab.gov.pk
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Annex 2
Pakistan Macroeconomic Update
World Bank Presentation 13 October 2015
Pakistan Macroeconomic Update
IMPROVED ECONOMIC CONDITIONS
Inflation declined to 4.5% in FY15
Fiscal deficit contained at 5.3% of GDP due to high non-tax revenues and restricted expenditures, compared to 5.6%
in FY14
State Bank of Pakistan cut its key policy rate by 300 bps in FY15, owing to a decline in inflation (global oil price decline a factor)
GROWTH
Growth of 4.2% in FY15 compared to 4% in FY14, driven by services and agriculture, weaker than expected manufacturing performance
Growth maintains upward momentum, but remains below required levels to accelerate job creation
BALANCE OF PAYMENTS
Foreign exchange reserves reached US $13.6 billion on 30th June 2015
Current Account deficit modest at 0.8% of GDP
Less risk of a Balance of Payments crisis, as foreign exchange reserves supported by increased remittances of US $18.5
billion, decline in oil price and inflows from IFIs/donors
60 |
GROWTH
If the Governments medium-term program to remove constraints to growth shows steady progress, i.e., electricity
load-shedding, loss-prone SOEs, low access to finance, and poor revenue mobilization
Political and security risks are well managed
GDP growth reaches 4.5% in FY16 (the Government aims for 6%), and rises to 5.2% from FY18 onwards
BALANCE OF PAYMENTS
The Current Account deficit increases to 1% of GDP in FY17, slightly up from 0.8% of GDP in FY15
Foreign exchange reserves reach 3.9 months of import coverage by FY16, compared to 3.3 months by the end of FY15
Slightly higher foreign investment inflows under CPEC and initial privatizations, multilateral financial net inflows decline
Gross financing requirements reach US $7.7 billion by FY17
FISCAL DEFICIT
Consolidated fiscal deficit is cut in half, from 5.3% of GDP in FY 15 to 2.8% in FY19
PUBLIC DEBT
Public Debt to GDP ratio declines to 62.9% in FY17, from 64.6% in FY15
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Annex 3
Indexation Mechanism for Foreign and Local O&M Cost
The O&M component of the tariff will be adjusted on account of local Inflation (CPI) and foreign inflation (US CPI) and
exchange rate quarterly on 1st July, 1st October, 1st January and 1st April based on the latest available information with
respect to CPI notified by the Pakistan Bureau of Statistics (PBS), US CPI issued by US Bureau of Labor Statistics and
revised TT & OD selling rate of US Dollar notified by the National Bank of Pakistan as per the following mechanism for
the 2016 Tariff:
L O&M(Rev)
F O&M(Rev)
L O&M(Rev)
F O&M(Rev)
O&M(Ref)
The reverence O&M component of tariff for North Region Rs. 1.8715/kWh and for South Region Rs. 1.7674/kWh
CPI(Rev)
The revised Consumer Price Index (General) published by the Pakistan Bureau of Statistics
CPI(Ref)
The reference Consumer Price Index (General) of 201.620 for the month of July 2015
US CPI(Rev)
The revised US CPI (All Urban Consumers) published by US Bureau of Labor Statistics
US CPI(Ref)
The reference US CPI (All Urban Consumers of 238.654 for the month of July 2015
ER(Rev)
The revised TT & OD selling rate of US dollar published by the National Bank of Pakistan
ER(Ref)
Where
P(Rev)*(LIBOR(Rev)-0.31%)/4
The variation in interest charges applicable corresponding to variation in 3 months LIBOR. I can be positive or
Where
I
negative depending upon whether LIBOR(Rev) is >or<0.31%. The interest payment obligation will be enhanced
or reduced to the extent of I for each quarter under adjustment applicable on quarterly basis.
P(Rev)
The outstanding principal (as indicated in the attached debt service to the NEPRA tariff determination) on a
quarterly basis on the relevant quarterly calculation date. Period 1 shall commence on the date on which the
first installment is due after availing of the grace period.
ROE(Ref)*ER(Rev/ER(Ref)
Where
ROE(Rev)
ROE(Ref)
ER(Rev)
The revised TT & OD selling rate of US dollar as notified by the National Bank of Pakistan
ER(Ref)
62 |
Ins(Ref)/P(Ref)*P(Act)
AIC
Ins(Ref)
P(Ref)
P(Act)
Actual Premium or 1% of the EPC cost in PKR on exchange rate prevailing on first day of the insurance cover-
Where
| 63
Annex 4
Standard Letter of Support
Dear Sir,
A. REFERENCE
[], a company incorporated under the Companies Ordinance, 1984, under certificate of incorporation no. [] dated [],
(the Project Company):
(i) having received the Letter of Intent dated January 30 ,2014 from Alternative Energy Development Board (AEDB)
whereby AEDB has confirmed its interest in the Project, as defined herein and, where applicable, the successful submission of a feasibility study; and
(ii) having received from NEPRA a Tariff Determination No [] dated [] on the terms and conditions set out therein as
amended from time to time (the Tariff Determination and the tariff determined pursuant thereto, the Tariff); and
(iii) having received from NEPRA a electricity generation license no. [], dated [] (the Generation Licence) for the
generation of electric power on the terms and conditions set out therein,
is now issued this Letter of Support (the LOS), on the terms and conditions set out herein, by AEDB for the development, design, engineering, manufacture, procurement, financing, construction, completion, testing and commissioning,
insurance, ownership, operation and maintenance of an approximately []MW ( ISO gross installed capacity) power generation facility (the Complex) to be located near [], Province of [] and all activities incidental thereto (the Project).
The Complex shall be a renewable electricity generation facility utilizing [] as the renewable energy resource for generation of electricity.
The Project Company has posted in favor of AEDB an irrevocable, unconditional, on demand, without recourse, bank
guarantee on terms acceptable to AEDB dated [] issued by (name of issuing bank ) (the Performance Guarantee) in
the amount of US Dollars []. The Performance Guarantee secures the Project Companys obligations to execute the
Project Agreements (reference paragraph B(1)), to achieve Financial Closing (reference paragraph B(2)) and to pay the
Termination Amount (reference paragraph B(6)) under and in accordance with the terms of this LOS. The Performance
Guarantee shall remain valid and in full force till the expiry of three (3) months beyond the Required Financial Closing
Date (as specified in paragraph B(2)) provided however, in the event the Financial Closing is achieved on or prior to the
Required Financial Closing Date, the Performance Guarantee shall be returned to the Project Company on the date of its
achievement of Financial Closing,. The Performance Guarantee shall be encashable in accordance with the terms of this
LOS at any time prior to Financial Closing, on call at any time during the period of its validity by AEDB. The Project
Company hereby agrees that it shall have no claim against AEDB, the Government of Pakistan (the GOP), the Government of [] (the GO[]) or any agency or instrumentality or component thereof on any grounds whatsoever if AEDB
acting in its sole discretion shall make any call upon or encash the Performance Guarantee; provided that such call or
64 |
encashment is made in accordance with the terms of this LOS, and the Project Company hereby waives, to the fullest
extent permissible by law, any such claim. It is agreed that the amounts encashed under the Performance Guarantee in
accordance with the terms of this LOS are reasonable and constitute liquidated damages to the GOP and AEDB for the
Project Companys failure to (as applicable) (a) execute the Project Agreements (reference paragraph B(1)), (b) timely
achieve Financial Closing (reference paragraph B(2)) and (c) pay the Termination Amount (reference paragraph B(6)), in
each case, in accordance with the terms of this LOS, and it is understood and agreed that the encashment in full of the
Performance Guarantee by the AEDB is in lieu of actual damages for such occurrence and the collection of such sums
pursuant to such Performance Guarantee pursuant to this LOS is the sole remedy of the GOP and AEDB for such events.
Until Financial Closing (as defined hereinafter), this LOS and the provisions of the Project Agreements (as defined hereunder) that become effective immediately upon signing of the Project Agreements shall govern the implementation of the
Project and shall supersede all other documents and agreements. In the event of any conflict between this LOS and the
provisions of the Project Agreements that become effective upon signing, this LOS shall govern and prevail. Effective on
the date Financial Closing is achieved by the Project Company, the Project Agreements shall supersede the LOS. AEDB
shall cancel and return the Performance Guarantee to the Project Company on the date Financial Closing is achieved.
B. AUTHORIZATION
AEDB hereby conveys its permission to the Project Company to implement the Project in accordance with the terms of
this LOS and, when the Project Agreements become effective, in accordance with the Project Agreements. Electricity produced by the Complex shall be sold to the National Transmission and Despatch Company Limited (through its Central
Power Purchasing Agency) on behalf of ex-WAPDA distribution companies (the Purchaser) in accordance with the
Generation License, Tariff Determination and the provisions of the Energy Purchase Agreement (EPA) to be entered
into between the Project Company and the Purchaser. The Project Company shall be responsible for performing and
causing the performance of all activities necessary and incidental to its obligations under this LOS, including the following:
1. The Project Company shall, on or prior to the Required Financial Closing Date or (if applicable in terms of this LOS)
the Extended Required Financial Closing Date, negotiate and sign an Implementation Agreement (IA) with the President of the Islamic Republic of Pakistan and an EPA with the Purchaser, failing which the Performance Guarantee
shall be encashed for the full amount thereof by AEDB provided that if the delay is caused by the actions of the GOP,
AEDB or the Purchaser, then, the Project Company shall not be penalized.
The IA and EPA are collectively referred to in this LOS as the Project Agreements.
2. Unless Financial Closing is delayed or not achieved on account of any Consents (as defined in the IA) not being issued
to the Project Company despite its compliance with its obligations under the IA relating thereto by the Required
Financial Closing Date or the Extended Financial Closing Date, the Project Company shall achieve Financial Closing
no later than [insert date] (the Required Financial Closing Date), failing which the Performance Guarantee shall
be encashed in the full amount thereof by AEDB, provided that if the delay is caused by actions of the GOP, AEDB
or the Purchaser, then, the Project Company shall not be penalized. In addition to any other consequences set out in
the Project Agreements, if AEDB determines that any delay by the Project Company in achieving Financial Closing by
the Required Financial Closing Date is due to events beyond the reasonable control of the Project Company or that
Financial Closing can be achieved shortly, AEDB shall be entitled (acting on an application in writing made to it by
the Project Company at least thirty (30) days before the Required Financial Closing Date to grant in writing to the
Project Company a one time extension of up to a maximum period of six (6) months beyond the Required Financial
Closing Date (such extended date being hereinafter referred to as the Extended Required Financial Closing Date
and this LOS shall stand correspondingly extended on the same terms and conditions for such additional period. No
claim for an extension to the Required Financial Closing Date and the period of validity of this LOS shall be accom| 65
modated or considered by AEDB unless the following actions are taken by the Project Company to the satisfaction of
AEDB (i) the Project Company extends the period of validity of the Performance Guarantee so that the Performance
Guarantee is valid on the same terms and conditions up till three (3) months beyond the Extended Required Financial
Closing Date; and (ii) the maximum amount in which the Performance Guarantee can be called is doubled. Following any extension as aforesaid, the Project Company shall submit monthly reports that set out in adequate detail the
additional efforts made by the Project Company to achieve Financial Closing no later than the Extended Required
Financial Closing Date and the progress achieved in that regard. In the event the Performance Guarantee is extended
in accordance with the terms of this LOS up till three (3) months beyond the Extended Required Financial Closing
Date, such Performance Guarantee shall expire and shall be returned to the Project Company on the date falling on
the earlier of: (i) the date on which Financial Closing is achieved by the Project Company; (b) the date falling three (3)
months after the Extended Required Financial Closing Date.
3. For the purposes of this LOS, Financial Closing means (a) the execution and delivery of the Financing Documents
(as defined in the IA) that together with equity commitments evidence sufficient financing for the construction, testing,
completion, and commissioning of the Complex (following the resolution of any objections raised by AEDB to a term
sheet or debt repayment schedule that sets out a principal repayment schedule and the other principal terms of the
transaction between the Project Company and the Lenders (as defined in the IA)) and the evidence of commitments
for such equity as is required by the Project Company to satisfy the requirements of the Lenders and this LOS and
the satisfaction, waiver or deferral of all conditions precedent for the initial availability of funds under the Financing
Documents, and (b) the delivery of the Seller Letter of Credit (as defined in the EPA) to the Purchaser.
4. In no event shall Financial Closing be deemed to have occurred unless the Project Company has paid all amounts then
due and owing to AEDB under this LOS.
The Project Company shall pay AEDB the processing fee of US $100,000 within one (01) month of issuance of this
LOS.
The Project Company shall also be responsible for performing and causing any and all other activities necessary and
incidental to its obligations under this LOS.
5. The Project Company will have the option (to be exercised in writing only) to terminate this LOS and all (and only
all) of the Project Agreements executed by the counterparties thereto at any time before the Required Financial
Closing Date. Such termination option may only be exercised upon payment by the Project Company to AEDB of
an amount (Termination Amount) equal to (i) the maximum amount in which the Performance Guarantee can
be encashed multiplied by the number of months from the date of issuance of this LOS to the date of receipt by
AEDB of the Termination Amount (rounded up to the next whole number) divided by the total number of months
from the date of issuance of the LOS to the Required Financial Closing Date, and (ii) the receipt by AEDB in full of
the processing fee. In the event of termination of this LOS and/or the Project Agreements by the Project Company
without payment of the Termination Amount, AEDB shall be entitled to encash the Performance Guarantee. For the
avoidance of any doubt, in the event that the Project Company exercises the termination option during the additional
period provided for achieving Financial Closing, the entire doubled amount of the Performance Guarantee shall be
encashable on call by AEDB and the Termination Amount shall be construed accordingly.
C. PROJECT COMPANY
The rights and obligations of the Project Company hereunder shall be performed by the Project Company, provided
always that the Main Sponsor (as defined in paragraph D) shall remain primarily responsible for all acts and omissions
of the Project Company.
66 |
D. EQUITY CONTRIBUTION
[Messrs/Mr] (the Main Sponsor) will be required to hold at least twenty (20) percent of the equity (being the issued
and subscribed share capital from time to time) in the Project Company during the lock-in period which will be from
the date this LOS becomes effective until the sixth (6th) anniversary of the Commercial Operations Date (as defined in
the EPA). The Initial Shareholders (as defined in the IA) shall together hold not less than fifty-one (51) percent of the
equity (being the issued and subscribed share capital from time to time) in the Project Company from the date this LOS
becomes effective until the sixth (6th) anniversary of the Commercial Operations Date (as defined in the EPA).
G. GENERAL
1. The Project Company shall be responsible for the performance of its obligations hereunder jointly and severally with
the Main Sponsor.
2. Any notice or communication by or to the Project Company under this LOS shall be deemed a notice or communication to or by the Main Sponsor and the Initial Shareholders.
3. The Project Company represents and warrants to AEDB that it is duly authorized to accept, agree, enter into, deliver
and perform this LOS in accordance with its terms on behalf of itself, the Main Sponsor and the Initial Shareholders.
4. This LOS shall be governed by and construed in accordance with the laws of Pakistan and the Courts of Pakistan at
Islamabad shall have exclusive jurisdiction in relation to any dispute or matter arising out of or in connection herewith.
5. This LOS shall become effective on the later to occur of (i) submission of the Performance Guarantee, or (ii) the date
on which a copy of this LOS signed by the Project Company is received by AEDB.
6. This LOS and the rights and obligations hereunder of the Project Company, the Main Sponsor and the Initial Shareholders shall not be assigned, transferred, sold, mortgaged or encumbered without the prior consent in writing of
AEDB.
7. Capitalized terms shall bear the meanings ascribed to them in the pertinent paragraphs herein.
Kindly sign the attached copy of this LOS at the place indicated and return the same to us.
With regards,
Yours sincerely,
[insert name]
[insert designation]
| 67
Name___________________________
Title: ___________________________
Main Sponsor Being duly authorised for and on behalf
of all Sponsors/the Project Company, the Main Sponsor
and the Initial Shareholders
On [Insert Date]
Cc:
1.
2.
3.
4.
5.
68 |
Annex 5
The First Schedule to the 2001 Ordinance provides the following tax rates for Individuals and Association of Persons:
(1) Subject to clause (1A), the rates of tax imposed on the taxable income of every individual and Association of Persons
except a salaried taxpayer shall be as set out in the following table, namely:
TABLE
S. No.
Taxable income
Rate of tax
(1)
(2)
(3)
0%
2. Where the taxable income exceeds Rs.400,000 but does not exceed
Rs.500,000
3
4
5
6
7
8
3. Where the taxable income exceeds Rs.500,000 but does not exceed
Rs.750,000
Rs.500,000
4. Where the taxable income exceeds Rs.750,000 but does not exceed
Rs.1,500,000
Rs.750,000
5. Where the taxable income exceeds Rs.1,500,000 but does not exceed
Rs.2,500,000
Rs.1,500,000
6. Where the taxable income exceeds Rs.2,500,000 but does not exceed
Rs.4,000,000
Rs.2,500,000
7. Where the taxable income exceeds Rs.4,000,000 but does not exceed
Rs.6,000,000
Rs.4,000,000
Provided that in the case of an association of persons that is a professional firm prohibited from incorporating by any
law or the rules of the body regulating their profession, the 35% rate of tax mentioned against serial number 8 of the
table shall be 32% for tax year 2016 and onwards.
(1A) Where the income of an individual chargeable under the head salary exceeds fifty per cent of his taxable income,
the rates of tax to be applied shall be as set out in the following table namely:
| 69
TABLE
S. No.
Taxable income
Rate of tax
(1)
(2)
(3)
1.
0%
2.
Where the taxable income exceeds Rs.400,000 but does not exceed
Rs.500,000
3.
Where the taxable income exceeds Rs.500,000 but does not exceed
Rs.750,000
Rs.500,000
4.
Where the taxable income exceeds Rs.750,000 but does not exceed
Rs.1,400,000
Rs.750,000
5.
Where the taxable income exceeds Rs.1,400,000 but does not exceed
Rs.1,500,000
Rs.1,400,000
6.
Where the taxable income exceeds Rs.1,500,000 but does not exceed
Rs.1,800,000
Rs.1,500,000
7.
Where the taxable income exceeds Rs.1,800,000 but does not exceed
Rs.2,500,000
Rs.1,800,000
8.
Where the taxable income exceeds Rs.2,500,000 but does not exceed
Rs.3,000,000
Rs.2,500,000
9.
Where the taxable income exceeds Rs.3,000,000 but does not exceed
Rs.3,500,000
Rs.3,000,000
10.
Where the taxable income exceeds Rs.3,500,000 but does not exceed
Rs.4,000,000
Rs.3,500,000
11.
Where the taxable income exceeds Rs.4,000,000 but does not exceed
Rs.7,000,000
Rs.4,000,000
12.
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Annex 6
Environmental and Social considerations for renewable energy projects and financing
The development of all solar and wind projects will have both environmental and social implications with the scale and
nature of impacts dependent on a number of factors including, among others, plant size, location, nearest settlements and
proximity to environmental designations. Some of the key factors are discussed further in the following sections.
APPLICABLE STANDARDS
In order to deliver a project acceptable to international lending institutions (i.e. to enable finance to be provided), work
should be carried out in accordance with the requirements of the key standards and principles set out in the following
sections.
EQUATOR PRINCIPLES
The Equator Principles (EPs) (www.equator-principles.com) consists of ten principles relating to environmental and social assessment and management. In addition, they include reporting and monitoring requirements for Equator Principles
Financial Institutions (EPFIs). The EPs set a financial industry benchmark, adopted by financial institutions, for determining, assessing and managing environmental and social risk in projects.
There are currently 78 EPFIs in 34 countries that have officially adopted the EP standards. The institutions listed will
not provide finance to clients who do not, or are unable to, comply with the EPs. Some of these lenders such as the European Bank for Reconstruction and Development (EBRD) or other international or local financial institutions may have
additional standards to be adhered to.
The EPs apply globally and to all industry sectors and hence are relevant to the solar and wind industries.
The ten EPs relate to the following topics:
EP1 - Review and Categorization.
EP2 - Environment and Social Assessment.
EP3 - Applicable Environmental and Social Standards.
EP4 - Environmental and Social Management System and Equator Principles Action Plan.
EP5 - Stakeholder Engagement.
EP6 - Grievance mechanism.
EP7 - Independent Review.
EP8 - Covenants.
EP9 - Independent Monitoring and Reporting.
EP10 - Reporting and Transparency.
IFC PERFORMANCE STANDARDS ON SOCIAL AND ENVIRONMENTAL SUSTAINABILITY
As set out in EP3, countries not designated as High Income OECD countries should apply the social and environmental
sustainability standards laid down by the International Finance Corporation (IFC). These standards have been developed
for the IFCs own investment projects but have set an example for private companies and financial institutions worldwide.
| 71
The IFC Performance Standards on Environmental and Social Sustainability (www.ifc.org/performancestandards) relate
to the following key topics:
Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts.
Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources.
Compliance with the IFC Performance Standards will not only facilitate a socially and environmentally sustainable project but will also facilitate the sourcing of finance for the project. In addition, a set of Guidance Notes, corresponding to
the Performance Standards, was developed by IFC to offer helpful guidance on the requirements contained in the Performance Standards, including reference materials, and on good sustainability practices to improve project performance.
In addition to EP1 on impact assessment, where there are multiple projects located within close vicinity, the cumulative
nature of impacts must be considered for both wind and solar projects. Please refer to the IFC Good Practice Handbook
on Cumulative Impacts Assessment for further information (http://www.ifc.org/sustainabilitypublications).
LOCAL, NATIONAL AND INTERNATIONAL ENVIRONMENTAL AND SOCIAL LEGISLATION AND REGULATIONS
Environmental and social legislation and regulations vary between countries and specific regions; however, the EP and
IFC Performance Standards set the minimum acceptable standard for developments worldwide.
A large number of countries have national legislative requirements that are on a par with or higher than the EP / IFC
standards and guidelines. In this instance, the more stringent national requirements should be reviewed and adhered to.
In countries where environmental and social legislation requirements are less demanding, a project seeking financing by
the IFC / EPFI must be developed in accordance with these requirements but must also commit to comply with the EP /
IFC standards.
72 |
Annex 7
Sindh Land Policy 11 June 2015
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74 |
| 75
76 |
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78 |
Annex 8
Transmission and Distribution Maps
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80 |
| 81
82 |
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84 |
Bryanne Tait
IFC Regional Lead for Energy
and Resource Efficiency Advisory
Middle East and North Africa
Phone: +97143601016
E-mail: [email protected]
January 2016