$3 bln plan a much-needed boost to Pakistan renewables

Hong Kong-listed United Energy Group Ltd plans to invest USD3 billion to develop wind power in Pakistan and is in talks to buy turbines from Chinese suppliers, according to Reuters.

The company, which had previously focused solely on oil and gas in China, says the money will be used to fund construction a 500-MW wind farm for which it has already obtained approval from the Pakistani government.

News of such a large foreign investment in Pakistan’s nascent wind sector has no doubt been officially well received but will do little to quell popular discontent in the county over its on-going electricity supply crisis.

According to reports, United Energy could tap into a USD5 billion credit facility with state-owned China Development Bank Corp to fund the project. Selling additional shares or issuing bonds are also being considered as funding sources, according to the company, which says it has been approached by other Chinese companies looking to co-invest.

It is unclear why United Energy has earmarked USD3 billion for investment since that appears to be well over the odds to build a single 500-MW wind project, and it has so far not laid out any other plans on how it intends to use the money. In July last year, for example, Norwegian renewable energy company NBT AS expressed a formal interest in building a 500-MW wind power project in Pakistan for about USD1 billion.

On a smaller scale, Turkey’s Zorlu Energy is investing USD136 million in a 56.4-MW wind farm, the first in Pakistan. FFC Energy, a subsidiary of Pakistan’s Fauji Fertilizer Company, is plans to invest USD135 million in a 50-MW wind power development while China Three Gorges Corporation is building a 49.5-MW wind farm in Pakistan for USD130 million.

Although Pakistan’s Alternative Energy Development Board (AEDB) was established in 2003, the country has been slow to exploit its renewable energy potential. Now, however, thanks primarily to foreign investors, the picture is changing. In October 2011, the Pakistan National Electric Power Regulatory Authority approved an Rs12.61 (13.5 US cents) per KWh feed-in tariff for foreign-financed wind power projects.

The US National Renewable Energy Laboratory has estimated Pakistan’s total wind power potential to be 346-GW. One of the best areas, with a potential of approximately 50-GW according to the AEDB, is the Gharo-Keti Bandar wind corridor which stretches 60-km along the coast of Sind Province and more than 170-km inland.

Pakistan's current, modest goal is to derive at least five percent of its energy from renewable sources by 2030. In 2010 53 percent of Pakistan’s’ total energy came from natural gas, 30 percent from oil and the rest from coal, nuclear and hydropower, according to the latest BP Statistical Review of World Energy. Other sources of renewable energy didn’t register there.

By the end of this year, however, AEDB is expecting to achieve a target of harnessing non-hydro renewable energy sources to produce 400-MW. The target could be a record in itself as it is believed that no country has been able to harness 400-MW of renewable energy within six years of its first plant. The extra power is much needed.

Pakistan is currently in the grips of an electricity supply crisis, due to a shortage of oil and gas supplies while water reserves in the country’s hydropower dams are also decreasing. As a result, load shedding of electricity is a daily occurrence.