1000 megawatts import from CASA: Cabinet to approve proposal today

MUSHTAQ GHUMMAN

ISLAMABAD (February 23 2010): The Cabinet, which is scheduled to meet on Wednesday, under the chairmanship of Prime Minister Yousaf Raza Gilani, will formally approve the proposal of the Ministry of Water and Power regarding import of 1000 mw electricity from Central Asia-South Asia (CASA) - a project overwhelmingly supported by the US State Department and the World Bank, sources told Business Recorder.

The estimated cost of power as per techno/commercial feasibility report, carried out by consultants SNC Lavlin, is estimated at 7.5-8.5 cents per kWh, as communicated by the Executive Director, IGC Secretariat, Kabul. The cost per unit of electricity imported from Tajikistan will be lower than the average cost of rental power plants (RPPs) in Pakistan, which is 12.27 per kWh, sources said.

The Cabinet in its meeting on April 8, 2009 had considered the summary of the Water and Power Ministry on ex post facto approval of the Cabinet to the Memorandum of Understanding (MoU) and agreement for import of electricity from CASA regional electricity market and had granted ex post facto approval, but had vetoed ex post facto approval of the Inter-Governmental Agreement (IGA) till tariff/import price of electricity from this source was estimated to conclusively establish its economic feasibility in comparison with existing sources, including rental plants.

According to sources, the 3rd IGC meeting was held in August, 2008 in Islamabad wherein an IGA was signed by the relevant Ministers from Afghanistan, Kyrgyzstan, Pakistan and Tajikistan for development of CASA 1000 mw power transmission project and for further development of a Central Asia South Asia Regional electricity market. Prior approval of the Cabinet could not be obtained due to time constraints.

Initially, the Asian Development Bank (ADB) was active, but at a later stage it backed out from the project. Official documents, made available to this newspaper, show that Pakistan's team, IFI consulting teams, and the representatives of the US government, had met between July 3l and August 2, 2008 to discuss the CASA 1000 mw project and reached the following consensus, which was to be considered as a recommendation to the IGC for endorsement.

INSTITUTIONAL STRUCTURE
The concession would include the Kyrgyz-Tajik link (aka AC facilities). The concession company would develop, construct and operate Tajik-Afghan-Pakistan transmission system (aka the DC facilities) as well as construct Kyrgyz-Tajik link. A decision on whether to also include the operations and maintenance of the AC facilities in the concession is under consideration.

TRADING ARRANGEMENTS
In the first IGC meeting over VC, it was considered in principle that Barki Tojik (Tajikistan) could be the consolidator in the initial phase which would require Kyrgyz Genco to sell power to Barki Tojik (at the Tajik-Kyrgyz border) on the Kyrgyz-Tajik link (which is part of the CASA 1000 mw project) and Barki Tojik will then sign a single PPA each with DABM/DABS and CPPA. But this was subject to further discussion.

The documents show that the decision was made to consider concluding a joint commitment of energy from Kyrgyz Republic and Tajikistan. While they may conclude separate direct PPM with the purchasers, they will make arrangements for close co-operation on energy delivery and storage to meet their joint commitment.

LEGAL FRAMEWORK
There will be a single concession agreement. The legal advisors will examine the need for host country agreements, one with each country, to capture the country-specific rights and obligations (eg tax, labour laws) and concessionaire's rights and obligations to that country (environmental, social).

ENERGY FLOWS
Until additional exportable capacities are developed, Kyrgyz Republic and Tajikistan should together firmly commit 5 TWh flow on average per year through the line during the operating period of the concession agreement (which will be 25-30 years) to be delivered during the summer months. Roughly speaking, Tajikistan should commit to 3 TWh and Kyrgyz Republic to 2 TWh. Exporting countries will invest to cover the load growth and, in doing so, they can maintain the summer surplus.

Once the line is constructed, the options for additional generation include upgrading existing facilities and constructing new generation projects. This could include thermal projects which would allow for non-summer power to be exported. The long-term objective of all the parties is to stimulate additional low cost.

INVESTMENT AND FINANCING
The inter-government negotiators had recognised that there had been increase in costs, in part because of demand for electricity equipment and in part because of commodity price increases (eg for steel and aluminium). The final project cost will be determined through the bidding process.