Privatization, The way forward to eliminate circular debt: CEO K-Electric

News Desk

DUBAI/KARACHI: During the ‘7th Leaders In Islamabad Summit’, power sector experts and leaders, including the CEO of K-Electric and the Minister of Energy, Awais Leghari, shared their views on the future of the energy sector in Pakistan. Mr. Moonis Alvi, CEO of K-Electric, said, “Pakistan’s power sector is poised for a significant transformation, with privatization being the way forward to eliminate the circular debt.”

At the session, Federal Minister of Energy, Awais Leghari shared important information on the forward plan concerning the energy industry within Pakistan. “K-Electric is an important case study to understand privatization” he said highlighting the need for policy interventions to address the sector’s fault lines, including debt restructuring, efficient gas utilization, energy-efficiency and wheeling to fast-track the development of open competitive markets.

Moonis Alvi further explained how the privatization process for KE led the efforts to usher in more efficiencies including the use of technology which aided in lowering T&D numbers, “We still must cover the distance to bring down T&D losses to single digits and reduce generation costs. Recently, we published our RFPs for solar and wind that will add approximately 640 MW of renewable energy to K-Electric’s generation portfolio.”

Speaking about the global energy transition and dealing with the power sector’s issues, Ayla Majid said, “we have a very clear roadmap to deal with the issues of the power sector, which need to be implemented today and put the energy trilemma which is energy accessibility, affordability and sustainability into perspective which cannot be attained immediately but in following the roadmap we have, net-zero can eventually be achieved.”

Meanwhile Awais Leghari, the Federal Minister of Energy said that the government has taken a bold decision to limit CPPA’s power purchase contracts, since pre-privatization reforms are underway, including identifying efficient board members and divesting government interest in DISCOs. The goal is to create an efficient environment for the next 10 years, with a strengthened regulatory framework and a customer-centric approach.

“Pakistan has immense potential, with low power consumption per capita and growing demand. Privatization can attract investors, but policy continuity and predictability are crucial.” commented Moonis saying that intending buyers will find a good opportunity as the business case exists for optimization under current conditions. Former caretaker Minster of Energy, Muhammad Ali further mentioned how we have a mindset to continue to live in the status quo, “why don’t we privatize NTDC? The National Grid of UK is already privatized, the Philippines too has privatized its transmission company as well.”

Leghari further added that the sector needs to address its inefficiencies, including high salaries for underutilized staff and inefficiencies in executing projects within NTDC. Rationalizing the tariffs and eliminating cross-subsidies are also essential. Referring to the imbalance in the supply-demand side of the power sector the Minister Leghari added that Pakistan has enough generation capacity, “what the house needs to understand is that there is a serious shrinking of demand on the grid right now. Over the next 5-8 years more hydel power development and other power plants are scheduled to be added to the grid,” allaying to the need for demand to be stimulated.

Sharing some findings to add a silver lining to the panel discussion, the former caretaker Energy Minister Mohd. Ali, commented on how energy-efficiency initiatives can work in Pakistan’s favor, “to give an example, if you replace all the fans of the country with energy efficient ones it can save about $2bn of fuel imports every year. Similarly tube-wells, running on diesel can save another $2.5bn in fuel imports. There are several inefficient appliances being used in the country that will soon be replaced in the future.” further remarking that other areas requiring improvements are in space-cooling/heating and cooking using gas.

At the Summit, other key industry experts and power sector leaders discussed the future of the government to privatize or enter into agreements with identified companies, judging the private sector’s appetite for investment. The Minister further added that CPPA will create an interactive forum for business leaders on wheeling policy and cited that the regulator’s (NEPRA) capacity to address customer needs to be further strengthened.