Initiative for hydro-power projects
THE energy department of the Sindh government has been mandated to tap the province’s vast network of barrages and canals for electricity generation.
Sindh has over 42,000 water courses, with 13,234 miles of canals and three major barrages. Depending on the water levels and its flow, it is expected that 100 MW run of the river electricity can be produced in the province.
Opting for public-private participation (PPP) mode, the department has issued Request for Qualification (RFQ) from international and local developers /consortia that have necessary technical competence, experience and financial strength for development, execution and running of power plants.
The RFQ specifically pertain to development of 2.5 to 3.0 MW run of the river (ROR) power project on existing fall regulator RD15 at Rohri Canal, located at about 4.6km downstream of the canal head regulator.
The pre-qualification documentation package is to be submitted to the government latest by January 05, 2013.
For this ROR project, the Government of Sindh (GoS) has engaged a consortium comprising Ernst & Young Ford Rhodes Sidat Hyder as transaction advisors, WS Atkins International Ltd. and Techno Consult International as technical consultants and Norton Rose LLP and RIAALAW as legal consultants.
After a study of the river flows in Sindh, this advisory consortium has identified sites with potential for development of ROR power projects. The GOS has identified RD15 at Rohri Canal as the first site that it would like to develop on a PPP basis.
The GOS has set up PPP Unit (PPPU) in the finance department under provincial PPP Act 2010. It launched its first project namely Hyderabad Mirpurkhas Dual Carriageway project which is under construction. PPPU has also moved to initiate Thar coal, wind power, gas based thermal and ROR projects.
This project shall be undertaken under the federal Policy for Development of Renewable Energy for Power Generation 2006. Set up under the RE Policy 2006, GOS role would be to participate in the project equity (up to a maximum of 49 per cent) and to facilitate in applying for the requisite regulatory approvals and licences for the project.
Once the developer is selected, the management control and all decisions and responsibilities with regard to development and operations of the plant shall be with the developer/majority shareholder.
The GOS shall, however, continue to assist the project company in the development of the project under the arrangements/terms agreed with the developer.
In addition to the incentives and options available under RE Policy 2006, given the issues related to circular debt and its impact on IPPs and its lenders and sponsors, GOS intends to provide payment security mechanisms to the project company.
Such mechanisms are aimed at mitigating the risks associated with payment defaults of the power purchaser and are designed to improving project attractiveness for sponsors and lenders.
The purpose of GOS in providing such support to the project is to exploit the hydro-electric power potential of the province and facilitate investment in infrastructure development in the province.
A Sindh government official recently explained that PPP is a formalised relationship between public and private sectors, anchored on agreements and contracts and built in a way that secures both investors’ and government’s interest; that provides value for money for both parties and for the beneficiaries in general.
While the GoS initiative is positive, the PPP mode is not new. There is mixed experience in such projects. The disputes among stakeholders, the consequential delays and cost overruns have to be avoided.
Capacity development is not easy particularly when in relates to infrastructure projects under PPP mode of finance. GOS may continuously require top grade expertise of the PPPU employees and professionals. It is also imperative that the trained employees are kept posted at PPPU for a long time, if not permanently.