Message from Project Director

HP Cogen-Pak Project aims to promote sustainable production of energy, for export of surplus electrical power to the national grid, through replication of existing High Pressure Cogeneration (HPC) technologies in the sugar sector as well as stimulate sustainable consumption of bagasse by supporting sugar mills in the adoption of HPC technology, through technology standardization, enabling access to finance, and mobilization of relevant public sector authorities for the formulation of a conducive regulatory regime for bagasse based power projects.

European Union

High Pressure Cogeneration for Sugar Sector in Pakistan

Annual Newsletter

The representatives of the European Union Delegation to Pakistan Mr. Amaury Hoste (2nd Left and Ms. Roshan Ara (4th Left) along with NEPRA officials during Training Program

December 2015

Project Kick-Off Event Mr. Benoist Bazin, Head of Section, Delegation of the European Union (EU) to Pakistan inaugurated the EU funded “High Pressure Cogeneration for Sugar Sector in Pakistan (HP Cogen-Pak)” under the EU SWITCH ASIA Program. “Promotion of High Pressure Cogeneration will promote not only energy security of Pakistan, but also generation of electricity from renewable fuels” said Mr. Bazin during his keynote speech at the ceremony. The event was attended by representatives of Ministry of Water and Power (MoWP), National Electric Power Regulatory Authority (NEPRA), Private Power Infrastructure Board (PPIB), Alternative Energy Development Board (AEDB), State Bank of Pakistan (SBP), Climate Change Division, Pakistani Boiler Manufacturers and Sugar Mills.

First Meeting of Project Steering Committee (PSC) A PSC has been formed comprising the representatives of AEDB, MoWP, PPIB, SBP, CCD, Cabinet Secretariat, PSMA and NTDC to guarantee smooth running of the project and best possible coordination among the project partners and associates during the implementation of the project.

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Media Coverage of Kick-Off Event

adoption of HPC Technology by the sugar sector has been hampered due to its high upfront cost, perceived technological risks, lack of capacity of local technology providers, regulatory issues, coupled with extended licensing period and a non-responsive financial sector. Upfront cost of High Pressure Technology is $1.0 million/ MW which is very high. Thus, in the absence of an attractive financing mechanism and associated risks, sugar mills owners are reluctant to switch to high pressure system. Because of this lukewarm interest in the technology, local manufacturers have subsequently been passive in developing their expertise in collaboration with international partners. In view of the non-

availability of a conducive policy framework, and the high technical risks in these projects, banks treat HPC Technology based projects as unattractive and high risk. The activities of HP Cogen-Pak has been focused on initial assessment of financial sector with respect to access to finance for sugar sector, formation of multi-stakeholders platform and NBPSC, technical assessment of NEPRA and Technology Providers, development of detailed bankable feasibility reports and business cases for HPC Technology, evolution of standardized technical specification for HPC Technology, capacity building of Technology Providers on technology standardization by bringing the relevant stakeholders on board, and capacity building of NEPRA officials in areas of Regulatory Affairs, Commercial, Technical, and Legal functions.

Omar M. Malik

Pakistani sugar sector is aware of HPC technology. However, widespread

Capacity Building Program for National Electric Power Regulatory Authority (NEPRA) on Tariff Determination

Trainers & Project Officials Mr. Amaury Hoste addressing the participants

HP Cogen-Pak organized the Capacity Building Program for NEPRA officials. The five days training program continued from 7th September 2015 to 11th September 2015 at NEPRA Tower, Islamabad. Distinguished fellow Mr. K. Ramanathan from The Energy and Resource Institute (TERI), India was the resource person along with Mr. A. Velayutham, Sr. Consultant from TERI. Mr. Omar Malik, Project Director, introduced the structure of capacity building program and shared the expertise of resource persons. Mr. Amaury Hoste (Head of Section, Rural Development and Economic Cooperation of the EU Delegation) briefed the participants about EU cooperation and assistance for the promotion and development of renewable energy sector in Pakistan. During the training sessions, design and development of the upfront tariff models were discussed in detail. Relation of Cost of Service (COS) in tariff development was illustrated through examples and the computations of technical and commercial losses were illustrated through practical case studies. Experts elaborated the methods for cost allocations, incurred due to demand side, and presented the models and structures of tariff based on renewables like biomass, solar and wind. They also shared examples and experiences from India, Germany and USA regarding financial aspects of tariffs having contextual relevance with system prevailing in Pakistan. All the sessions were interactive and at the end NEPRA participants shared

their views and feedback on the training sessions and their learning experiences. Mr. Sajid Akram (Director Tariff-II) acknowledged the contribution of trainers and expressed gratitude on the behalf of NEPRA team. Mr. K. Ramanathan appreciated the active participation of NEPRA officials in the training sessions and he also provided a brief on future capacity building programs under the HP Cogen-Pak project. At the end of training program, Brig. (R) Tariq Saddozai (Chairman NEPRA), Maj. (R) Haroon Rashid (Vice Chairman, NEPRA), and Mr. Himayat Ullah Khan (Member, KPK, NEPRA), awarded the certificates to the all participants. Mr. Amaury Hoste and Ms. Roshan Ara (Development Advisor, Trade and Economic Cooperation) from European Union Delegation to Pakistan were also present in the certificate distribution ceremony.

Issue 1 | Dec 2015

Development of Business Cases of HPC System 40 Sugar Mills are registered with the program. The program is developing detailed Feasibility Study Reports (FSRs) for 10 sugar mills and business cases for 70 sugar mills. 8 detailed FSRs have been delivered to the beneficiaries. Business cases are under development.

Project Website The Project launched a dedicated website to disseminate project updates and outcomes to all stakeholders. The project website aims to constitute a medium for information flow and communication between the public, stakeholders, beneficiaries and implementation partners. The website is updated as key milestones are reached and is being used for disseminating information related to events, planned activities, and programme publications. For more details please visit HP Cogen-Pak website www.hpcogenpak.org

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Participants of NEPRA Training Program

Distribution of Certificates to the Participants of Training Program

Training on HP Boiler Manufacturing at HMC Training on HP Boiler Manufacturing at KS&EW Issue 1 | Dec 2015 Training on HP Boiler Manufacturing at Fabcon

Trainings for HP Boiler Manufacturers A training programme has been developed in conjunction with the boiler manufacturers, based on training needs assessment and staff capacity assessment. The trainings included design procedures, material selection, fabrication methodology and commissioning procedures. The program is focused to build indigenous capacity in HP Boiler manufacturing, resulting in reduced cost of technology and technology indigenization. The participants were trained on HP Boiler erection & dismantling, commissioning & maintenance and safety codes.

The engineering staff of HP Boiler Manufacturers & faculty of University of Engineering and Technology, Taxila were trained on designing, installation and commissioning of HP Boilers through presentations, field visit and KED (Software for Boiler designing).

In-house Training for HMC The training was conducted in three phases: Phase I (16 - 20 February 2015), Phase II (24 - 28 March 2015) and Phase III (17 - 21 August 2015). These trainings were conducted by Mr. Frans Baltussen (International Boiler Expert) at Heavy Mechanical Complex (HMC), Taxila.

In-house Training for KS&EW The training was conducted in three phases: Phase I (02 - 06 March 2015), Phase II (27 - 30 April 2015) and Phase III (31 August - 04 September 2015). These trainings were conducted by Mr. Frans Baltussen (International Boiler Expert) at Karachi Shipyard & Engineering Works (KS&EW), Karachi.

In-house Training for Fabcon The training sessions for first two phases have been completed: Phase I (16 - 20 March 2015) and Phase II (13 - 17 April 2015). The Phase III is planned during third year of the project. These trainings were conducted by Mr. Frans Baltussen (International Boiler Expert) at Fabcon Design & Engineering, Lahore.

The participants were satisfied and highly appreciated these training sessions.

Ensuring Financial Closure for 10 High Pressure

Cogeneration Projects

Detailed Feasibility Reports developed and delivered to following Sugar Mills • Shahtaj Sugar Mills (Punjab) • Bandhi Sugar Mills (Sindh) • Faran Sugar Mills (Sindh) • Safina Sugar Mills (Punjab) • Ansari Sugar Mills (Sindh) • Tando Allayar Sugar Mills (Sindh) • Shakarganj Mills I (Punjab) • Shakarganj Mills II (Punjab)

Four Sugar Mills have acquired Generation Licenses

• Safina Sugar Mills • Bandhi Sugar Mills • Ansari Sugar Mills • Tando Allayar Sugar Mills

Four Sugar Mills have applied for Letter of Intent

• Shahtaj Sugar Mills • Faran Sugar Mills • Shakarganj Mills I • Shakarganj Mills II

Media Coverage of Trainings for HP Boiler Manufacturers

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Meeting with Bandhi Sugar Mills Ltd. to deliver and discuss Detailed Feasibility Report

Participants of HP Boiler Manufacturing Training Program during Site Visit

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Meeting with Allied Bank Limited Meeting with Pak Brunei Investment Meeting with State Bank of Pakistan

HP Cogen-Pak participated in 49th PSST Convention (14-15 September 2015) that was inaugurated by Malik Sikandar Hayat Khan Bosan, Federal Minister for National Food Security and Research, while chief guest of closing ceremony was Mr. Riaz Qadeer Butt, CEO Macca Group. More than 100 visitors were briefed on HP Cogen-Pak Project. Mr. Murad Ali Bhatti (President PSST & Technical Director Macca Group), Mr. Anwar

Hussain Shah (Resident Director, Dewan Group), Mr. Abdul Qadar Khatak (Director Chashma Sugar), Mr. Javed Anwar (GM, Prod, Al-Noor Sugar), Mr. Pervaiz Akhtar & Mr. Saifulla (Sr. AVPs, Shakarganj Mills), Mr. Malik Waheed (Group Technical Director, Omni Group), Mr. Naveed Akhtar (Resident Director, Noon Sugar), Mr. Kashif Naseem (Sales Director, Kashif Export) and officials from several other sugar mills visited HP Cogen-Pak pavilion. Project team raised awareness regarding HP Cogen-Pak services, especially capacity building activities in different areas for sugar sector and potential of power export to the national grid through adoption of high pressure cogeneration in sugar mills.

HP Cogen-Pak Participated in 49th PSST Convention

Exhibition (2-4 April 2015) was inaugurated by Mr. Hameed Ullah Jan Afridi, Ex. Environmental Minister, while chief guest of closing ceremony

was Mr. Arif Alluddin Ex. CEO AEDB. Around 200 visitors were introduced about HP Cogen-Pak Project. The visitors included Mr. Asjad Imtiaz (CEO – AEDB), Dr. Shahina (UNIDO), Dr. Basharat (AEDB) & Mr. Nafees (Advisor World bank) and several public sector officials. Project team raised awareness on activities of the project and the potential of power export to the national grid through High Pressure Cogeneration in sugar sector of Pakistan.

HP Cogen-Pak Participated in 4th International Exhibition on Renewable Energy & Energy Efficiency

Project Contact Information

2nd Floor, Al-Maalik Building, 19-Davis Road, Lahore, Pakistan Tel: +92-423-6313235/6 ● Fax: +92-423-6312959

E-mail: info@ihtpk.com ● Web: www.hpcogenpak.org

“This publication has been produced with the assistance of the European Union. The contents of this publication are sole responsibility of Implementing partners IHT, PSMA, TERI & Sequa and can in no way be taken to reflect the views of the European Union.”

Implementation Partners

European Union

GAP Analysis of Financial Sector HP Cogen-Pak Project Partner Sequa gGmbH undertook a GAP Analysis of the Financial Sector and identified five major barriers to access to finance for the majority of sugar mills in Pakistan.

1. High Project Sponsor Risk 2. Significant Power Sector Circular

Debt 3. Lack of effectiveness Renewable

Energy Facility of the State Bank of Pakistan (SBP)

4. No Credit Enhancement Facility 5. Lack of Transparency of Information

Mr. Matthew Dever (International Financial Expert) conducted the study, which revealed mitigation options, which included; improving sponsor risk profile, restructuring SBP’s role in the renewable energy sector, and developing credit enhancement instruments. Ten Financial Institutions have been engaged by the project, which are:

• State Bank of Pakistan • Department for International

Development (DFID) • Pak Brunei Investment Company

Limited • International Finance Corporation

(IFC) • Habib Metropolitan Bank • Meezan Bank • MCB Bank Limited • Habib Bank Limited • Allied Bank Limited • United Bank Limited

Meeting with Habib Bank Limited