internship report (power)
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The two month internship A rated stuff,,,,,TRANSCRIPT
TABLE OF CONTENTS
CHAPTER 1 INTRODUCTION
1.1 FOUNDER OF THE GROUP
1
1.2 HABIBULLAH GROUP AT A GLANCE
1
1.3 HEL EXISTENCE 2
1.4 MANAGEMENT STRUCTURE
2
CHAPTER 2 COMPANY ANALYSIS
2.1 OPERATIONAL ANALYSIS
3
2.2 FINANCIAL ANALYSIS 3
2.3 HUMAN RESOURCE ANALYSIS
3
2.4 MARKETING ANALYSIS
4
CHAPTER 3 ENVIRONMENTAL ANALYSIS
3.1 GLOBAL POWER SCENARIO
5
3.2 INDUSTRY ANALYSIS
5
3.2.1 HISTORY OF ENERGY SECTOR IN PAKISTAN
5
3.2.2 ENERGY OVERVIEW
6
3.2.3 OIL OVERVIEW 7
3.2.4 ENERGY SECTOR ORGANIZATION
7
3.2.4.1 Privatization
8
3.2.5 EXPLORATION 8
3.2.5.1 Licensing rounds
9
3.2.5.2 Downstream
9
3.2.5.3 Refining 9
3.2.6 NATURAL GAS 10
3.2.6.1 Liquefied Natural Gas (LNG)
11
3.2.7 COAL
12
3.2.8 ELECTRICITY 12
3.2.8.1 Hydroelectricity
13
3.2.8.2 Conventional Thermal
13
3.2.8.3 Other Renewable
14
3.2.8.4 Nuclear
14
3.3 MARKET ANALYSIS
14
3.4 PRESENT ENERGY SCENE IN PAKISTAN
15
3.5 PRESENT OPERATIONAL IPPS IN PAKISTAN
16
CHAPTER 4 COMPETITOR ANALYSIS
4.1 OVERVIEW 19
4.2 JAPAN POWER GENERATION LIMITED
19
4.2.1 COMPANY PROFILE 19
4.2.2 VISION
19
4.2.3 MISSION 19
4.2.4 FEATURES
20
4.3 ROUSCH (PAKISTAN) POWER LIMITED (RPPL)
20
4.3.1 RPPL PPA 21
4.4 KOHINOOR ENERGY LIMITED
22
4.4.1 COMPANY PROFILE 22
4.4.2 VISION 22
4.4.3 MISSION 22
4.5 THE COMPARATIVE ANALYSIS
23
4.6 THE STRATEGIES
24
4.7 TECHNOLOGIES BEING USED BY ENERGY SECTOR
25
CHAPTER 5 DEPARTMENT WORKED
5.1 IDENTIFICATION OF A PROBLEM
26
5.2 FINDINGS 26
5.3 CONCLUSIONS & RECOMMENDATIONS
27
REFERENCES
CHAPTER 1
INTRODUCTION
1.1 FOUNDER OF THE GROUP
Habibullah group was established by hafiz Muhammad Habibullah. He
was born in 1890 and was educated in Bukhara, where he stayed from
1911 to 1919. He was engaged in business from 1920 to 1926 and in
china from 1927 to 1930. The government of Pakistan appointed him
as an ambassador to Malaysia from 1974 to 1976.
The British Indian army awarded him with a sword of honor the same
year and he won the title of “Sahib Bahadur”. The president of
Pakistan awarded him “Sitara-e-Khidmat” in 1964.
1.2 HABIBULLAH GROUP AT A GLANCE
Habibullah Mines LimitedHabibullah Energy Limited
Tandianwala Sugar Mills LimitedHabibullah Coastal Power Private Company
Habibullah Energy Group
Figure 1.1: Affiliated companies
The following companies are affiliated ones with the Habibullah
Group. Habibullah Coastal power is a power generation company, the
other one is a sugar manufacturing company, Habibullah Energy
Limited is a power project development company and Habibullah
mines is a coal mining company. El Paso is a Fortune 500 company
and is a global leader in the energy industry. It holds a primary
position in the segment of natural gas value chain. It has been a
leading provider of gas services and has operations in natural gas
transportation, gas gathering and processing. The company has also
been actively participating in power projects development and power
project financing. The El Paso project portfolio in Pakistan includes 3
power projects:
Saba Power Company Limited
Habibullah Coastal Power Company Ltd.
Fauji Kabirwala Power Company Ltd.
El Paso Corporation
1.3 HEL EXISTENCE
HEL is one of the companies of Habibullah Group and was established
in 1987. The registered and head office of the company is at Karachi.
It was established as a public limited company with the aim of power
development projects in the country. Following are the three main
directors of the company:
Mr. Saeedullah Khan Paracha (MD)
Mr. Hameedullah Khan Paracha
Mr. Tariq Saifullah Paracha
1.4 MANAGEMENT STRUCTURE
Apart from these, the company has at its disposal director
coordination at Karachi who is responsible for the network and liaison
between HEL and government, financial institutions and foreign
companies.
CHAPTER 2
COMPANY ANALYSIS
2.1 OPERATIONAL ANALYSIS
The registered office of the company is located at Karachi. The deputy
director coordination is responsible for all the arrangements between
the company and financial institutions and other government bodies.
The company runs its operations from Islamabad office and things are
coordinated via email, phone and fax. In case of some odd work
timings, the employees are informed on time and night shift also
works. The lower staff people are hired on permanent basis for
handling the faxes and mails; they are also responsible for daily office
management and draft work. The company has started and put its
operations in real estate sector as well. The “Bentley Forbes” project
in Abu Dhabi is an example which has still in its initial stage.
2.2 FINANCIAL ANALYSIS
Currently HEL is running many projects. Some projects are financed
via 20%Equity stake some are with 25% stake. The rest are some joint
ventures with foreign companies like El Paso. The strategic alliances
are with some local companies as well. World Bank and some foreign
banks provide equity. The one very famous example is the joint
venture of HEL and El Paso for a 140 MW project at Quetta,
Balochistan. The manufacturers of the equipment include General
electric USA and Fait Avio Italy. Some projects are even financed with
10% equity stake of the company.
2.3 HUMAN RESOURCE ANALYSIS
HEL feels proud to hire the most competent labor from all over
Pakistan and abroad. The local employees are given three year
training and then hired on a permanent basis. The foreign contractors
like EPC and Al barrio employees are hired for project management
and feasibility study purposes. The CFO and COO are people with a
vast knowledge in the field of finance and accounting. Therefore HEL
hires people all over the world and believes in a global or geocentric
HR process. It finds out where the able work force resides and hires
on a completely unbiased basis. HEL is running its business in 4
sectors i.e. sugar, coal, power and mining. The Diversification
strategy is there and the business line of the company is vast. It is
currently operating in four segments. Some off-the job training is also
given to the employees. The employees are paid on salary which is
fixed monthly, plus some commission from a project which promises
high returns. The development comes as the employees associate an
old bond with the company. There’s is nothing as such extra or fringe
benefits, but if some employee’s family person falls sick, the company
provides him/her its best (in terms of money).
2.4 MARKETING ANALYSIS
The company is not involved in any kind of marketing activities. It
believes in making good networks with government officials and
financial institutions. There haven’t been any advertisements of jobs
or any other products. Since the projects are bid based, there has
been a very active competition among the power companies in
Pakistan and bid winning system.
CHAPTER 3
ENVIRONMENTAL ANALYSIS
3.1 GLOBAL POWER SCENARIO
Figure 3.1 Top ten electricity producers of world, Source IEA
Figure 3.2 Top ten power players of world, Source IEA
3.2 INDUSTRY ANALYSIS
3.2.1 HISTORY OF ENERGY SECTOR IN PAKISTAN
Pakistan has seen minimal growth in its energy sector, but the
country’s economy has experienced vital growth, in spite of the
earthquake in 2005. Pakistan's economy has recovered from years of
sluggishness, caused primarily to droughts, with growth experienced
in the agriculture, industry and service sectors. In fiscal year (FY)
2004/2005 (ending in June), Pakistan achieved gross domestic product
(GDP) growth of 8.4 percent and in 2005/2006 the country had GDP
growth of 6.6 percent. High inflation (9.1 percent) in 2004/2005 was
attributed to escalating oil prices, higher housing rents and food item
shortages. In an effort to decrease inflation, the central bank of
Pakistan announced that it would raise interest rates. The strategy
worked, with inflation decreasing to 7.6 percent by the end of FY
2005/2006. The International Monetary Fund (IMF), and the World
Bank, both major donor organizations to Pakistan, have acknowledged
the favorable performance and progress in Pakistan’s structural
reforms, but have stressed even greater reform in the public
institutions and the public energy sector where progress has been
slow. In 2004, the IMF approved a fresh loan of nearly $250 million as
part of its overall $1.5 billion aid package to Pakistan. In 2005, the
United States began the first installments of a $3 billion aid package,
which will continue through 2010. In 2006, the World Bank approved
loans of $185 million for various reform and infrastructure projects, in
addition to the nearly $850 million loaned to the country in 2005.
Figure 3.3 Sector wise electricity consumption in Pakistan, Source: Federal Bureau of Statistics of Pakistan
3.2.2 ENERGY OVERVIEW
In recent years, the combination of rising oil consumption and flat oil
production in Pakistan has led to rising oil imports from Middle East
exporters. In addition, the lack of refining capacity leaves Pakistan
heavily dependent on petroleum product imports. Natural gas
accounts for the largest share of Pakistan’s energy use, amounting to
about 50 percent of total energy consumption. Pakistan currently
consumes all of its domestic natural gas production, but without
higher production Pakistan will need to become a natural gas
importer. As a result, Pakistan is exploring several pipeline and LNG
import options to meet the expected growth in natural gas demand.
Pakistan’s electricity demand is rising rapidly. According to Pakistani
government estimates, generating capacity needs to grow by 50
percent by 2010 in order to meet expected demand.
3.2.3 OIL OVERVIEW
Pakistan produces some oil, but imports the majority of oil consumed
in the country. According to Oil and Gas Journal (OGJ), Pakistan had
proven oil reserves of 300 million barrels as of January 2006. The
majority of produced oil comes from proven reserves located in the
southern half of the country, with the three largest oil-producing
fields located in the Southern Indus Basin. Additional producing fields
are located in the Middle and Upper Indus Basins. Since the late
1980s, Pakistan has not experienced many new oil fields coming
online. As a result, oil production has remained fairly flat, at around
60,000 barrels per day (bbl/d). During the first eleven months of 2006,
Pakistan produced an average of 58,000 bbl/d of crude oil. However,
Pakistan has ambitious plans to increase its current output to 100,000
bbl/d by 2010. Due to Pakistan’s modest oil production, the country is
dependent on oil imports to satisfy domestic oil demand. As of
November 2006, Pakistan had consumed approximately 350 thousand
barrels of oil and various petroleum products, of which, more than 80
percent was imported. The majority of oil imports come from the
Middle East, with Saudi Arabia as the lead importer.
Figure 3.4 oil production & consumption
3.2.4 ENERGY SECTOR ORGANIZATION
Pakistan’s Ministry of Petroleum and Natural Resources regulates the
country’s oil sector. The Ministry grants oil concessions by open
tender and by private negotiation. To encourage oil sector investment,
the Ministry has offered various tax and royalty payment incentives to
oil companies. Pakistan’s three largest national oil companies (NOCs),
include the Oil and Gas Development Corporation Limited (OGDCL),
Pakistan Petroleum Limited (PPL) and Pakistan State Oil (PSO). All
three operate under joint ventures and partnerships with various
international oil companies (IOCs) and other domestic firms. Major
IOCs operating in Pakistan include BP (UK), Eni (Italy), OMV
(Austria), Orient Petroleum Inc. (OPI, Canada), Petronas (Malaysia)
and Tullow (Ireland).
3.2.4.1 Privatization
In response to conditions laid down by lenders, such as the IMF and
the World Bank, Pakistan continues to strive for privatization of its
state-owned companies. For instance, the government has on offer a
51 percent stake in PPL, as well as a 54 percent stake in PSO. PPL
owns the Sui fields in Balochistan, as well as exploration interests in
22 blocks, while PSO holds a majority share in the domestic diesel fuel
market with more than 3,800 retail outlets. In November 2006,
Pakistan plans to have a share issue from OGDCL for the equivalent of
15 percent of the NOCs capitalization. Five percent of the company
was previously divested in November 2003 in an initial public offering
(IPO). Pakistan hopes to reap significant revenues from these
privatizations over the next several years.
3.2.5 EXPLORATION
BP is the largest oil producer in Pakistan, with production averaging
approximately 30,000 bbl/d. The oil major operates 43 fields and more
than 100 wells throughout the country. OGCDL is Pakistan’s second-
largest oil producer, with average production at 25,000 bbl/d. While
there is no prospect for Pakistan to reach self-sufficiency in oil, the
government has encouraged private (including foreign) firms to
develop domestic production capacity. In 2005, NOCs and IOCs
drilled a total of 29 onshore development wells in Pakistan. BP led the
development by drilling ten wells in its Lower Indus Basin acreage,
while ODCGL drilled nine wells, with the majority being on its acreage
in the Middle Indus Basin. PPL expanded its interests in 2005, by
drilling offshore at the Pasni X2 shallow water field. It was the first
time a Pakistani oil company had explored offshore.
3.2.5.1 Licensing rounds
Historically, Pakistan has held few large licensing rounds, and
instead, has conducted private negotiations for acreage between
individual companies and the Ministry of Petroleum and Natural
Resources. In February 2006, Pakistan opened a rare licensing round
offering nine onshore and offshore blocks. From the blocks offered,
the Pakistani government awarded OGDCL three exploration licenses
in the southern Sindh and Balochistan provinces. The licenses cover
the Tegani, Thal and Than Beg Blocks and OGDCL has committed to
conducting geological surveys and to drilling four exploration wells on
the blocks. In June 2006, the government awarded POL an exploration
license for the Kirthar Block in southern Pakistan. In July 2006,
Pakistan awarded BP three blocks (U, V, and W) in the offshore Indus
Delta region.
3.2.5.2 Downstream
Pakistan's net oil imports are projected to rise substantially in coming
years as demand growth outpaces increases in production. Demand
for refined petroleum products also exceeds domestic oil refining
capacity, so nearly half of Pakistani oil imports are refined products.
Pakistan’s largest port is located at Karachi, which serves as the
principle point of entry for oil imports. PSO leads Pakistan's fuel
distribution market, with its main storage facilities located at Port
Mohammed Bin Qasim.
3.2.5.3 Refining
Pakistan has five refineries, with total refining capacity of just under
270,000 bbl/d. The largest of the refineries is the Pak-Arab Refinery
Complex (PARCO), which became operational in late 2000, with
95,000 bbl/d of refining capacity. In July 2004, Bosicor Pakistan
Limited (BPL) began commercial operations at its Mouza Kund plant,
near Karachi. The 30,000-bbl/d refinery is supplied with shipments of
crude oil from Qatar. The plant allowed Pakistan to become a supplier
of naphtha, which constitutes 20 percent of the output. The plant
produces about 10,000 bbl/d of fuel oil, 6,000 bbl/d of diesel, and
5,500 bbl/d of naphtha, among other products. PSO has a supply
contract to purchase the entire output of BPL's products for the next
10 years. In June 2006, Kuwait agreed to fund a $1.2 billion oil
refinery, which would have a planned capacity of 100,000 bbl/d. The
refinery would be located at Port Qasim in Karachi.
3.2.6 NATURAL GAS
According to OGJ, Pakistan had 28 trillion cubic feet (Tcf) of proven
natural gas reserves in 2006. The bulk of these reserves are located in
the southern half of Pakistan. In 2004, Pakistan produced and
consumed 968 billion cubic feet (Bcf). In light of the current onshore
exploration activities and resource outlook, the Pakistani government
expects minor increases in natural gas production in the short-term.
However, natural gas production is expected to decline over the next
15-25 year period, while natural gas demand is expected to increase.
The Pakistani government is currently developing plans to import
additional natural gas (see Proposed Pipelines below) in order to
satisfy increasing demand. According to the Pakistan Energy
Yearbook, natural gas is currently the country’s largest energy
source, making up 50 percent of Pakistan’s energy mix in FY
2004/2005.
Figure 3.5 Energy supply Mix
Pakistan’s state-owned PPL and OGDCL produce around 30 percent
and 25 percent, respectively, of the country’s natural gas. The two
companies are the country’s largest natural gas producers. OMV is
the largest foreign natural gas producer (17 percent of total country’s
production) in Pakistan. Additional foreign operators include BP, Eni,
and BHP Billiton. The Pakistani government has enacted numerous
policies to encourage private sector leadership of natural gas
development, including privatization of state-run businesses,
regulation that encourages competition and tax incentives geared
towards increasing exploration and production. A second natural gas
import possibility that has been considered is an eventual link to the
Dolphin Project in Qatar. This plan would supply natural gas from
Qatar's North Dome field to Pakistan via a sub sea pipeline from
Oman. Even though Pakistan has signed a preliminary agreement to
eventually purchase natural gas from Qatar, it remains to be seen if
further action on the project will be taken.
A third natural gas pipeline option that has been discussed is a line
from Turkmenistan to Pakistan via Afghanistan. Pakistan faces various
hurdles with this option, which include the security situation in
Afghanistan and the price Turkmenistan would charge for the natural
gas. In addition, completed feasibility studies on the project, funded
by the Asian Development Bank (ADB), indicate that the Turkmenistan
field of Daulatabad will only be able to supply a portion of the natural
gas needed by Pakistan.
Figure 3.6: Gas Pipe line Routes
3.2.6.1 Liquefied Natural Gas (LNG)
In addition to natural gas import pipelines, Pakistan is pursuing LNG
import options to meet energy needs. In October 2006, UAE-based
Dana Gas and its partners, Single Buoy Moorings and the Granada
Group signed a MoU to build an LNG import facility, with 3.5 million
tons per year capacity. The facility would be completed in 2010 and
would be located at Port Qasim, near Karachi.
3.2.7 COAL
Coal currently plays a minor role in Pakistan’s energy mix, currently
plays a minor role in Pakistan’s energy mix, although the country
contains an estimated 3,362 million short tons (Mmst) of proven
recoverable reserves. Pakistan produces small amounts of coal, 3.5
Mmst in 2004, and imports additional coal, 1.7 Mmst in 2004, to
satisfy demand. Recently, the discovery of low-ash, low-sulfur lignite
coal reserves in the Tharparkar (Thar) Desert in Sindh province,
estimated at 1,929 Mmst, has increased both domestic and foreign
development interest. China, which began developing various electric
power plants in tandem with the coal mines in 1994 in Pakistan, has
shown the most interest in the Thar region. However, several factors
have hindered development of the Thar coal reserves, including the
depth and moisture level of the lignite reserves, a scarcity of fresh
water, and lack of road and power infrastructure.
Figure 3.7 Coal production & consumption
3.2.8 ELECTRICITY
Pakistan had 20.4 gigawatts (GW) of installed electric generating
capacity in 2004. Conventional thermal plants using oil, natural gas,
and coal account for about 66 percent of Pakistan’s capacity, with
hydroelectricity making up 32 percent and nuclear 2 percent. The
Pakistani government estimates that by 2010, Pakistan will have to
increase its generating capacity by more than 50 percent to meet
increasing demand. In 2004, Pakistan generated 80.2 billion kilowatt-
hours (Bkwh) of electricity while consuming 74.6 Bkwh. Pakistan's
total power generating capacity has increased rapidly in recent years,
due largely to foreign investment, leading to a partial alleviation of
the power shortages Pakistan often faces in peak seasons. However,
much of Pakistan’s rural areas do not have access to electric power
and about half the population is not connected to the national grid.
Rotating blackouts ("load shedding") are also necessary in some
areas. In addition, transmission losses are about 30 percent, due to
poor quality infrastructure and a significant amount of power theft.
3.2.8.1 Hydroelectricity
Hydroelectric power represents a third of Pakistan’s power source,
however, periodic droughts affect the availability of hydropower
production. WAPDA controls the country’s major hydroelectric plants;
with the largest being the Tabela plant at 3,046 megawatts (MW)
installed capacity. The Tabela plant was the largest hydroelectric
plant in Asia until China began building the Three Gorges project,
which will have 18,000 MW of installed capacity. Additional
hydroelectric plants in operation include Mangla (1,000 MW), Warsak
(240 MW), and Chashma (184 MW).
Although Pakistan has plans to develop additional hydroelectric
generating capacity, infrastructure constraints, such as access roads
in mountainous regions and resettlement costs of affected populations
have stalled progress. Nevertheless, Eden Enterprises is going ahead
with its Suki Kinari (655 MW) hydropower project. Eden Enterprises,
along with Pakistani partners own 95 percent of S.K. Hydro, which
was given a 35-50 year concession period for the power plant.
Construction is expected to begin in 2009, with the plant coming
online in 2011. The Private Power and Infrastructure Board (PPIB) is
currently reviewing six additional hydropower projects for the Swat
River. If approved, the projects would provide several hundred MW of
additional hydroelectric power capacity to the country.
3.2.8.2 Conventional Thermal
WAPDA operates the majority of thermal power plants in Pakistan,
with over 5,000 MW of installed capacity in its control. The Guddu
plant is the largest plant operated by WAPDA, with a capacity of 1,650
MW. In recent years, growth in Pakistan’s thermal power generation
has come primarily from new independent power producers (IPPs),
some of which have been funded by foreign investors. The two largest
IPPs in Pakistan are Kot Addu (1,600 MW) and Hubb River (1,300
MW), both of which supply power to WAPDA. The Kot Addu plant was
privatized in 1996 (from WAPDA). International Power holds a 36
percent equity stake in the Kot Addu plant. The Pakistani government
has recognized that the majorities of thermal plants in the country are
run on fuel oil and produce considerable amounts of pollution. In an
effort to reduce pollution, the government would like to see fuel oil-
power plants converted to natural gas in the future.
3.2.8.3 Other Renewable
Pakistan is working to expand the use of renewable energy to help
bridge the gap of energy deficiency in the country. In 2003, the
Pakistani government created the Alternative Energy Development
Board (AEDB). AEDB’s primary objective is to help Pakistan achieve a
10 percent renewable energy share in the country’s energy mix. AEDB
is working to create an environment in Pakistan that is conducive to
investment from the private sector in renewable energy. In July 2006,
Turkish-based Zorlu Energji Grubu signed a letter of intent to install a
50-MW wind farm. Zorlu would operate the wind farm for 20 years
once the project is completed in 2008. Zorlu has indicated that it
would like to install an additional 2,000 MW of renewable energy
capacity in Pakistan by 2015.
3.2.8.4 Nuclear
Pakistan has two nuclear power plants, Chashma-1 and Kanupp, with
300 MW and 125 MW respectively, of installed capacity. The Pakistan
Atomic Energy Commission operates both nuclear plants. Pakistan is
currently working on a third nuclear power plant (Chashma-2), with
the help of China National Nuclear Corporation. The plant will have
325 MW of installed capacity and could be completed by 2009.
3.3 MARKET ANALYSIS
High levels of toxic emissions and a lack of energy efficiency
standards are two of the environmental issues facing Pakistan. In
Pakistani cities, widespread consumption of low-quality fuel,
combined with a dramatic expansion in the number of vehicles on the
roads, has led to significant air pollution problems. Lead and carbon
emissions are major air pollutants in urban centers such as Karachi,
Lahore, and Islamabad. A lack of energy efficiency standards has
contributed to Pakistan’s high carbon dioxide intensity. One hopeful
trend is that Pakistan has increasingly been using compressed natural
gas (CNG) to fuel vehicles. Currently, government vehicles and taxis
that have been using liquefied petroleum gas (LPG) are being
converted to CNG.
Global energy giant Chevron has made its entry into Pakistan’s
petroleum market in 2006.
Caltex informed that it had changed its corporate name from Caltex
Oil Pakistan to Chevron Pakistan Ltd. When contacted the General
Manager Public Affairs Irfan Qureshi confirmed the news and added
that the brand Caltex would remain unchanged.
Chevron is one of the biggest energy companies in the world,
operating in 180 countries. Pakistan now has three of the world’s top
companies operating in the petroleum sector. The other two are Shell
and Total. This move by Chevron should signal the government of
confidence of international companies taking interest in Pakistan’s
economic growth. The government can attract huge investment by
these foreign investors by pursuing policies that will keep such
international giants tied into Pakistan’s petroleum sector.
3.4 PRESENT ENERGY SCENE IN PAKISTAN
ECC on Wednesday approved 5.89 cents as an up front tariff for hydel
projects. This is a revolutionary step taken by Pakistan Government to
promote and encourage the investors in Hydel Sector. In fact this is
the most logical and wise step adopted by the government for energy
sector. This will encourage investors to come forward in hydel sector.
The Pakistan is blessed with high mountains covered by glaciers and
the rivers flowing across the country. PPIB so far processed 19 hydel
power projects to produce 4900 MW energy.
October was a month to be remembered when world oil prices shot up
at record level and at the end of the month it was staying at 94$ level.
It was almost certain that OGRA will allow the price hike for petrol
and diesel from 1st November. However a cabinet meeting in the
chairman ship of Prime Minister Shaukat Aziz overruled this decision
and kept the prices same.
However furnace prices were raised all time high by Rs. 4210 /ton for
domestic market. The price now stands on 34000 Rs. /ton. This price
hike can be justified in the light of rising crude oil prices but for
domestic market the fuel tariffs now are not so realistic.
The diesel and furnace prices are now standing at almost same level.
A little intelligent power house manager can start using diesel instead
of furnace which is much more clean and easy to burn or even can mix
the diesel with furnace lowering its viscosity and, make it more
comfortable to burn.
Those diesel genets which were running as stand bye generators and
are less efficient will be more attractive for end users and the furnace
power plants will be shut down.
For those IPP which run their plants on furnace this increase will be
shifted to utility company which is purchasing the power and hence to
WAPDA, which is already deep in trouble.
Mean time power shortage in whole country remained forcing the
utility companies for load shedding. Presently there are three
different critical problems in energy sectors which all need immediate
attention.
1. Current short fall in production and availability of no stand bye
power to meet any emergency
2. Long term increase of short fall with increased energy demands
3. Rising fuel prices making the production cost high
The projects in pipe line will start commissioning from 2014.
All planning of hydro and alternate energy is for next five years.
PRESENT OPERATIONAL IPPS IN PAKISTAN
Figure 3.8 Present IPP Pakistan, Source: PPIB
The ADB has announced provision of two million dollars in technical
assistance that would support optimal energy sector development in
Pakistan that would facilitate economic growth. The outcome of the
technical assistance would be a functioning energy-planning unit,
producing regular integrated analysis of strategic energy options. A
trained energy planning team would be established. It will operate
and maintain the model and propose strategies for meeting energy
requirements at the least cost and in a manner that is technically and
financially sustainable and environmentally acceptable, for
consideration by national policy makers.
Pakistan’s energy planning is unlikely to be optimal, or at least it is
not demonstrated to be so. Pakistan is a net energy importer, with
energy needs supplied from multiple sources. As such, country energy
analysts believe there is scope for optimisation through integrated
planning. This view is consistent with the approach of other
developing and developed countries where least-cost energy plans are
developed through a rigorous integrated process. Sophisticated
computer software applications currently available in the
international marketplace can model a country’s overall energy
demand and supply situation. These integrated energy models can
help planners to assess the impact of various policy scenarios and
support good decision-making within defined constraints. Pakistan
currently does not use such an integrated energy-modeling tool.
Pakistan’s Medium-Term Development Framework (MTDF) 2005–
2010 sets out a challenging program to achieve eight percent annual
growth in GDP. Associated growth in energy consumption is forecast
at 12 percent a year, which can be compared with an ACGR of 6.1
percent from 2000 to 2006. This expected growth will put pressure on
all sectors of Pakistan’s primary energy supplies.
Pakistan’s primary energy supplies totaled 58 million tones of oil
equivalent (toe) in 2005–2006. The supplies comprise natural gas (50
percent), oil (28 percent), hydro-electricity (13 percent), coal (7
percent), and nuclear energy (1 percent) and liquefied petroleum gas
(less than 1 percent). All domestic natural gas production is consumed
and, without higher production, growth will need to be met through
imports. The combination of rising oil consumption and flat oil
production has led to rising oil imports. In addition, a lack of refining
capacity leaves Pakistan heavily dependent on petroleum product
imports. Electricity supply is limited due to insufficient generation
availability, with an estimated 1,500 megawatts (MW) of demand
unmet. Meanwhile, electricity demand is forecast to grow by 8
percent a year during 2005–2015.
Pakistan is responding to this energy development challenge by
pursuing a wide range of domestic and imported energy projects.
Growth in domestic gas production is not forecast to meet demand.
Several international gas pipeline projects are under development
while liquid natural gas import options are being investigated.
Development of the significant but challenging coal reserves in
Tharparkar desert is being studied by the government. Consideration
is also being given to 2,000 MW of power-generation projects in the
private sector, using imported coal.
Further, the government intends to proceed with a large multipurpose
dam project on the Indus River to cater for irrigation needs and to
supply about 8,000 MW of electric generating capacity, and
investigations are being conducted currently into the Central Asia
South Asia Regional Electricity Market (CASAREM) project to import
more than 2,000 MW of electricity from Tajikistan and Kyrgyz
Republic via Afghanistan. Renewable energy projects are being
promoted, with a target of 10 percent of energy mix to be met from
such sources by 2015. Several energy efficiency projects are at an
early stage of development. Meanwhile, a lack of energy efficiency
standards has contributed to high carbon dioxide intensity.
CHAPTER 4
COMPETITOR ANALYSIS
4.1 OVERVIEW
Out of these registered IPP only three are taken as competitors. Since
the data for all the power companies and their strategies wasn’t
available, only those are taken into account whose data and
information was available.
4.2 JAPAN POWER GENERATION LIMITED
Japan Power Generation Limited engages in the generation and
supply of electric power to Water and Power Development Authority
in Pakistan. It owns, operates, and maintains an oil-fired power station
with an installed capacity of 135 megawatts, located at Jia Bagga
Railway Station, Raiwind Road, Lahore. The company was
incorporated in 1994 and is based in Lahore, Pakistan.
4.2.1 COMPANY PROFILE
Japan Power Generation Limited is a public limited company,
incorporated on September 29, 1994 under the Companies Ordinance,
1984 and its shares are quoted on Lahore and Karachi Stock
Exchange. The principal business of the company is to generate and
supply electric power to WAPDA. The company commenced actual
commercial operations w.e.f. March 14, 2000. Power plant is located
at Jia Bagga Railway Station, Raiwind Road, and District Lahore-
Pakistan, has an installed capacity of 135 MW, comprises of 24 diesel
power generator sets of 5.65 MW each and is designed for operation
using heavy furnace oil (HFO) while startup and shutdown operations
are on high speed diesel oil (HSD).
4.2.2 VISION
To become partner in progress of the country
4.2.3 MISSION
۞ To be a company that endeavors to set the highest standards
in corporate ethics, to achieve leadership through the use of
technology and contribute to the development of the society.
۞ To transform the company into a modern corporate entity by
achieving high standards of good governance.
۞ To earn better relationship with WAPDA by achieving
production at optimum level and efficiency by lowering
operating cost.
۞ To provide congenial working atmosphere to the employees
by taking care of their career planning and adequately
rewarding them for their contribution.
To honor social and cultural obligations towards the society
as a patriotic and conscientious corporate entity.
4.2.4 FEATURES
Company Japan Power Generation Limited Installed Capacity 135.6 MW Dependable Capacity 107 MWLocation Office Raiwind Road, Near Jia Bagga
Railway StationFuel Heavy Furnace Oil (HFO)Technology Diesel EnginesPlant Manufacture Mitsubishi Heavy Industries (Japan)Plant Operation & Maintenance Siemens Pakistan Engineering Co. Ltd.Power Purchaser WAPDA
Table4.1 Features of JPGL
4.3 ROUSCH (PAKISTAN) POWER LIMITED (RPPL)
It is a public limited company, registered in 1995 in Pakistan. The
Company being an Independent Power Producer (IPP) has installed a
thermal power plant on Build, Own, Operate (BOO) basis using the
combined cycle technology, fired (initially) with residual furnace oil,
having a gross (ISO) capacity of 412 MW at Sidhnai Barrage near
Abdul Hakim, district Khanewal, Punjab, Pakistan.
In March 1994, Government of Pakistan (GOP) introduced a new
policy framework for the Private Sector Power Generation Projects for
attracting foreign and domestic investments.
In pursuance to GOP Bulk Power Tariff (BPT) Policy, the Sponsors
submitted their proposal for the establishment of the said power plant
to the Private Power & Infrastructure Board (PPIB) of GOP. Based on
this proposal, PPIB awarded a Letter of Support (LOS) on June 22,
1994 to Sponsors. The Project sponsored by group of Rousch
Companies of British Virgin Islands, Siemens Project Ventures of
Germany, and ESBI Ireland. The Project was further financed by
Commercial lenders (ANZ London led consortium), Hermes, DEG, and
the funds contributed by the World Bank along with J-EXIM Bank.
4.3.1 RPPL PPA
RPPL has entered into a 30 years Power Purchase Agreement (PPA)
with WAPDA and Fuel Supply Agreement (FSA) with Pakistan State
Oil (PSO). The role of WAPDA and PSO has been guaranteed by the
GOP under the Implementation Agreement. Siemens AG, Germany
and Siemens Pakistan Engineering limited were the Construction
Contractors and ESBI Ireland is the Operation and Maintenance
(O&M) Contractor of the Plant.
The Financial Close of the Project took place on March 31, 1996 at a
total cost and funding of around USD 455 million. Construction
started in September 1996 and the Plant was ready for
interconnection on the 500 kV main grids in March 1998, the first
proposed Commercial Operation Date. However, a protracted dispute
with the GOP/WAPDA over tariff to be charged to WAPDA resulted in
a commissioning delay and a cost overrun of around USD 105 million.
Project has since been completed over a period of 39 months with a
total cost of around US$ 560 million, funded with a debt equity ratio
of 67:33.
The dispute which led to Project delay was finally resolved when the
Company executed a Memorandum of Understanding (MoU) with
WAPDA in January 2000, thereby agreeing to reduce the tariff.
Accordingly, WAPDA recognized the Commercial Operation Date
(COD) with effect from December 11, 1999. The Plant is in operation
since then with Initial Dependable Capacity (IDC) of 355 MW.
In support of declared policy of the GOP to convert residual fuel oil
power plants to natural gas; the Company had submitted a proposal
for the conversion of its Complex to gas fired facility. GOP allocated
the required natural gas to the Company. The conversion works at the
plant started from September 29, 2003 and the Complex was fully
converted to gas in January 2004. Accordingly, the Gas Operation
Date was declared with effect from January 24, 2004 and the
Dependable Capacity was achieved at 403.83 MW. With conversion of
plant on gas, the gross (ISO) capacity of the Plant has enhanced to
450 MW.
On 7th November 2006, Rousch Companies have disposed off all its
remaining shares to Power Management Company (Pvt.) Ltd. (PMCL),
whereas, Siemens Project Ventures have sold out 33.98% of their
shareholding to PMCL. Through acquisition of these shares, PMCL
now owns 59.98% of Company’s shares. PMCL is 100% owned
subsidiary of Altern Energy Limited.
4.4 KOHINOOR ENERGY LIMITED
4.4.1 COMPANY PROFILE
Kohinoor Energy Limited was incorporated in April 1994 with the aim
and objective to take part in the prosperity of the country through
power generation. KEL having paid-up capital of Rupees 1,695 million
and is a joint venture of Saigols Group of Companies (a well-known
multi-industrial group of Pakistan) and Toyota Tsusho Corporation (an
eminent consortium of multi-industrial undertakings of Japan.)
KEL is situated at 35-KM Link Manga Raiwind Road Lahore. It is one
of the pioneer projects of Independent Power Producers in Pakistan.
The principle activities of the company is to own, operate and
maintain a furnace oil power station with the net capacity of 124 MW
(gross capacity 131.44 MW). WAPDA is the sole customer of KEL.
The main equipment at power complex includes three ABB 63 MVA
Step-Up Transformers converting the Electrical Output from 11 kV to
132 kV, Eight WARTSILA Diesel 18V46 Type Diesel Generators having
rated capacity of 15.68 MW each and a Combined Cycle Heat
Recovery System capable of delivering an output of 8 MW through
Peter Brotherhood Steam Turbine.
4.4.2 VISION
To lead as an independent power producer (IPP) serving the nation
through the power industry
4.4.3 MISSION
To set the standards in the power industry in terms of:
۞ Reliability in responding to the customer’s dispatch for
electrical power
۞ Responsiveness to the attendant social and environmental
responsibilities
۞ Efficient management of processes and resources
۞ Human resource development and empowerment
۞ Commitment to quality systems and effective leadership
4.5 THE COMPARATIVE ANALYSIS
Company Capacity Technolog
y
Power
purchaser
Fuel
supplie
r
PPA term
Habibullah
Coastal
Power
140 MW Natural gas WAPDA SSGC 30 years
Japan
Power
Genaration
120 MW Residual
Furnace Oil
WAPDA PSO 30 years
Rousch
Power
Limited
412 MW Residual
Fuel Oil
WAPDA PSO 30 years
Kohinoor
Energy
Limited
131.5
MW
Residual
Furnace Oil
WAPDA PSO 22 years
Table4.2 Analysis Summary of HEL and competitors
Out of these four companies, only Kohinoor Energy Limited is
maintaining a quality and EHS policy. It fully recognizes and realizes
the importance of achieving satisfaction and confidence of its
customer(s) by providing uninterrupted Electricity through National
Grid under relevant contractual obligations.
Their commitment to quality is driven by the following guiding
principles:
۞ Meeting or exceeding customer need & expectations:
Customer requirements and expectations is determined,
reviewed and incorporated in power plant operations and
customer satisfaction is regularly monitored.
۞ Compliance with legal & regulatory requirements:
Strict adherence is ensured to any legal and regulatory
requirements that subscribe to power plant operations and
relevant activities.
۞ Continual improvement:
Continual efforts are made to minimize our rejections and
wastage, and improve the efficiency and effectiveness of
relevant processes and services.
EHS policy:
At Kohinoor Energy Limited, their commitment to environment, health
& safety (EHS) performance is an integral part of business and
achieving cost-effective EHS solutions is essential to long-term
success.
EHS program is based on the following principles:
۞ Eliminate accidents & incidents
۞ Reduce wastes and prevent environmental pollution
۞ Use energy and natural resources efficiently
۞ Educate & train our employees and contractors to understand how
their actions
influence EHS performance.
۞ Comply with applicable standards/regulations related to Environment,
Health &
Safety
۞ Communicate with our neighboring communities about our EHS
program and
performance
۞ Improve EHS performance continually through effective management
system.
4.6 THE STRATEGIES
The Kohinoor Energy limited is the only company which believes in
environmental protection and human rights. The corporate
governance concept is driven by the company. HEL is another one
which offers great to its employees. Though, all these are following
different financing techniques. The Rousch and HEL have financed
their projects with some portion of equity and debt. The loan
arrangements and agreements are taken as well. The Japan Company
stock is traded and daily stock is listed as well.
The authorized share capital of all these companies is different. The
Rousch, Kohinoor and Japan Power company have developed their
websites where investors can find out different information regarding
the investment opportunities in the energy sector. HEL doesn’t have
any website of its own, and investors often find it difficult to find the
appropriate information about the company. They have to get the
information from the specific people of the company. The technology
is almost the same for these four companies, but operational
strategies differ. At HEL, the deputy director coordination and
director operations are responsible for all the operational work. They
keep directing the lower staff office personnel for further assistance.
The capital structures of these companies even differ.
4.7 TECHNOLOGIES BEING USED BY ENERGY SECTORS
The energy sector in Pakistan is currently using nine types of
technologies. They are:
Gas
Residual fuel oil
Residual furnace oil
Natural gas
Low BTU
Gas pipeline data
Low BTU gas
Low sulphur furnace oil
Furnace oil
Some companies are using a hybrid (combined) technology as well.
CHAPTER 5
DEPARTMENT WORKED
The internship was a two months training period with in all the
departments of the company. The main work done was in the area of
accounting and finance, with some basic accounting standards
techniques adopted. The financial statements preparation was a major
task in the period. Also, some legal issues regarding the contracts and
agreements were also handled, which would be discussed in greater
detail. The main work came from the finance and coordination
department, where certain issues were handled on mails and faxes.
The communication kept going and the some new projects were
undertaken during the period.
The company entered into a main agreement with a foreign company
El Paso. Due to some conditions, the contract was breached, as per
specified in the “Articles of Memorandum” of the company. The
contract had already become void, which some of the company
lawyers did not agree to. The clash went on and they were convinced
that the contract has breached.
5.1 IDENTIFICATION OF A PROBLEM
The main problem with the company is the lack of marketing
department. Also it is a pubic limited company with no shares on any
stock exchange. The comparative analysis becomes difficult in terms
of daily stock price and quote. Some energy sector companies have
maintained their websites. HEL doesn’t have nay website or URL.
Also there are lot of people working in accounting and finance
departments, but there is not any proper HR system. The CEO selects
the people according to their potential and caliber. He doesn’t believe
in an HR system.
5.2 FINDINGS
Due to lack of an HR system, there are no advertisements in local
daily news papers. The other energy sector companies have ads and
job vacancies. In case a job vacancy exists, the knowledge is kept
confidential and the post is filled by either local or international
employee. In absence of a website, there is no online registration
system and the company at times finds it difficult to manage selection
and recruitment of people. Also the accounting standards differ. The
El Paso Company follows a different set of accounting standards, and
HEL follows different. There is a clash or dispute over certain
accounting book figures and details. The GAAP are followed by El
Paso. The dispute settlement at times takes too long to settle. Also the
court costs and consultant’s fees are higher in case of accounting
disputes.
5.3 CONCLUSIONS & RECOMMENDATIONS
The following is recommended:
۞ The company should a common set of accounting techniques
and train its accountants and finance people to manage both.
۞ HEL should have a proper marketing department, and hire fresh
talent, HEL doesn’t hire new talent but encourages work force
with a double digit experience in years.
۞ HEL should have a proper HR department. The selection and
recruitment process would be even faster and more efficient.
۞ HEL accountants should be trained to study and visualize a
variety of accounting standards. The standards differ across the
globe. Especially when it enters into agreements with foreign
companies, their accounting laws must be studied.
REFERENCES
Habibullah Energy Limited, 2006, Statement of Qualifications 2005-
2006, Karachi, Pakistan
Japan Power Generation Limited, 2007, Annual Report 2006-2007,
Lahore, Pakistan.
Kohinoor Energy Limited, 2007, Annual Report 2006-2007, Lahore,
Pakistan.
Rousch (Pakistan) Power Limited, 2007, Annual Report 2006-2007,
Pakistan.
IGI Securities, 2008, Power Generation Sector of Pakistan-Initiating
Coverage, Karachi, Pakistan.
Trancik , J 2006, ‘Scale and innovation in the energy sector’,
doi:10.1088/1748-9326/1/1/014009,pp 1-19, Retrieved July 16, 2008,
from IOP electronic journals.
Business Recorder, 2008, “Power Generation & Distribution”,
Business Recorder, 19 July, p.3.
Chaudhry S, 2008, “Complex regulatory structure mars Pakistan’s
energy sector: ADB”, Daily Times, 19 July, p.3.
Shah M, 2002, ‘Private Sector Investment in the Energy Sector -Case
of Pakistan’, proceedings from meeting at ADB, Karachi, Pak, 7-8 Feb,
pp 1-7.