A. Current FIT

A number of developers have expressed concern over their ability to apply for the current FIT before the end of 2015 particularly if land has to be acquired and certain consents obtained.

AEDB has kindly given us permission to confirm the following which developers may find helpful.

Issuance of LOI under current Upfront Tariff Regime

It has been confirmed that the Alternative Energy Development Board (AEDB) is continuing to process and issue Letters of Intent (LOI) to solar PV developers applicable under the current FIT.

AEDB is happy to share recommendations set out in a USAID funded grid interconnection study for renewables which has confirmed that it will be possible to integrate up to 2000MW of solar generation in 2015 /16 and up to 4,500MW solar based additional generation up to 2020.

Accordingly, AEDB confirms that it has the clear support and clear directions of the Ministry of Water & Power and the Government of Pakistan to issue LOIs without delay to both international land local developers.

Land specified in the LOI

It is not necessary to specify the exact land coordinates of the project in the LOI. The LOI needs to be clear about which distribution company will be engaged for the distribution of the power and accordingly the reference to the land area simply needs to be sufficient to enable this to be clear. Accordingly, AEDB will issue the LOI even provided the District located in the chosen province is indicated.

In addition, it may be permissible to transfer the LOI to another location with approval by AEDB.

Consents Required to apply for the Solar FIT

AEDB has confirmed that not every consent is required in order to apply for the FIT. The primary consents required to opt for the FIT are:

  1. approval from power purchaser/CPPA for the plant of which NTDC’s sign off of the grid connectivity study is a critical element; and
  2. obtaining the LOI from AEDB.

The approval of the feasibility study and other permits do not have to be in place prior to applying for the FIT however they will need to be approved by AEDB and in place before the issuance of the Letter of Support (LOS).

Land - Availability in Provinces

Although land is subject to the provinces, AEDB has confirmed that it is assisting developers by encouraging them to secure private parcels of land close to grid sub stations. There are certain land plots available with provincial Governments of Sindh and Punjab which could be explored by developers and AEDB will be happy to cooperate in this regard.

Word of Caution

Notwithstanding the above, timings are tight and developers wishing to proceed with the LOI process have very limited time to do so.

B. NEW FIT

Details of FIT

On 19 September NEPRA published the new draft tariffs for 2016. Interested persons who wish to comment or participate in a hearing to consider the draft tariffs must file comments within fifteen days after the publication date of 19 September 2015. The public hearing will take place in Islamabad on 15 October and details of the time and location are on the NEPRA paper with the link set out below. Attendance is at the discretion of NEPRA and intesrested parties should lodge a comment and a request to attend.

The draft includes the following tariffs:

Click here to view tble.

Assumptions:

The above is calculated on the basis of the following assumptions:

  • Annual O&M cost of US$ 26,541/MW and annual insurance during operation of US$ 9,600/MW
  • Capacity Utilization Factor of 19% on installed capacity
  • 0.5% Degradation for each year after year 1 has been incorporated in the panel cost
  • Exchange Rate of Rs. 105/US$
  • Debt Equity Ratio of 75.25
  • ROE of 17% on IRR basis
  • Interest Rate of KIBOR 7.02% = 3% premium for local financing and LIBOR 0.31% = 4.5% premium for foreign financing
  • Debt repayment period of 10 years
  • Construction period of 1 year

The 2016 tariffs are lower than those in place currently. To put this into context the NEPRA release from January 2014 set two tariffs, one North and one South. It included a series of degressions but the headline rate in USc in years one to ten was 20.1083 per KwH in the South and USc 22.9712 in the North.

Coordinated Response

There is a limited period to respond to the suggested second round FIT prices.

Together with MESIA, we will be coordinating a global response for developers. Accordingly, if you would like to send your feedback to us please email MichaelGrimes@Eversheds.com who will coordinate this.

Please complete the following sections:

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Comments:

Recommendations:

This will also be discussed at the MESIA Trade Delegation to Islamabad at which we will also take and coordinate comments. To register for the MESIA Trade Delegation please click here

A copy of the NEPRA Notice may be found by using the link below:

https://react.eversheds.com/rs/ct.aspx?ct=24F76F1FD7E344A9CCDD89ACD52C941DDBFB558EE9A62EE40