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PAKISTAN ENERGY FORUM-2015Oil, Gas, Power

MEGA-PROJECTSMEGA-INVESTMENT

LEVERAGING to SUCCESS

19-Feb-2015

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Leveraging Case Study from Khyber Pakhtunkhwa

Objectives1. Fast Track Hydel Projects (shrink time to COD)2. Cheap Indigenous Power3. Economic Change4. Fast Track P1 Oil & Gas Projects and

Equipment5. Release ADP for Social projects6. Leverage Liquid Gold (30,000 MW) & Black

Gold

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Definition of Leverage• Mechanical advantage gained by being in a

position to use a lever• Ability to influence a system in a way that

multiplies the outcome of the efforts without the corresponding increase in the consumption of resources. • A small amount of cost to yield high

returns.

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Lever

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Leveraging Case Study from Khyber Pakhtunkhwa

Leveraging Operational Hydro Power Plants1. Malakand 81 MW2. Pehur 18 MW3. Total 99 MW4. Both 100% owned by the Government of Khyber Pakhtunkhwa5. Zero Debt

Leveraging Under Construction Hydro Power Plants6. Daral Khwar 36.6 MW 100% GoKP Equity7. Ranolia 17 MW 80/20 Debt/Equity Ratio ADB/ADP8. Machi 2.6 MW 80/20 Debt/Equity Ratio ADB/ADP9. Total 56.6 MW

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Leveraging Case Study from Khyber Pakhtunkhwa

1. IPO 25% of Malakand & Pehur (IPPs)2. Refinancing of Malakand & Pehur (IPPs)3. IPO 25% of All IPPs4. Plough back NEPRA allowed ROE back

into Hydro Projects5. Net Hydel Funds from Tarbela6. Oil, Gas & LPG Royalty, Windfall Levy &

Production Bonus

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Leveraging Case Study from Khyber Pakhtunkhwa

Resultant Public Sector:

1. COD IPP 270 MW HPP by 20182. COD IPP 800 MW GTCC by 20183. COD IPP 5,000 MW HPP by 20224. COD IPP 10,000 MW HPP by 20255. Raising/Investment $ 25 Billion (100

time KP annual Budget)6. Double Oil & Gas Production by 2025

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Next to be Leveraged (not selling)

1. Tarbela, Mangla……2. Gencos3. Govt Share in companies like KAPCO4. Transmission System5. DISCOs6. Oil/Gas Fields of OGDCL, PPL, Mari &

GHPL7. Surface Facilities of Oil/Gas

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Leveraging Process Action

1. Concept cleared by the Energy Apex Committee of Government of Khyber Pakhtunkhwa – Feb-2014

2. Interacted with international and national Financial Advisers, Fund Arrangers, Banks, Lawyers etc.

3. RFP Floated to raise $ 800 Million (Sept-2014) for Fund Arranger

4. Two Strong Consortia Bid (others wanted but late) – One winner

5. Next RFP End-March US$ 1 Billion6. Valuation7. Hiring Advisers: Legal, Owners Engineer, Insurance,

Risk Management, Audit

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Leveraging Investment Process Action1. Pakhtunkhwa Energy Development

Organization PEDO has independent BOD2. Establishing a KP Power Holding Company Ltd.3. Establishing a SPV for each Hydro Power plant

or a cluster4. Infrastructure Bonds5. Listing KSE, AIM, LSE6. Establishing a Company in Jersey Island7. Market based Salaries

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Thousand of Micro/Small Hydro Financial Leveraging

1. A few Pilot Projects2. Generation License, Tariff, by Govt of KP3. Upfront Tariff4. PPA by SPV 100% owned by Govt KP5. PEDO facilitating Planning, Financing and

EPC – Cook Book/Conferences6. Community Participation7. Prepaid Meters

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Oil & Gas Sector Financial LeveragingRevenue from Security

• Government of Khyber Pakhtunkhwa has created a ‘Fulcrum/pivot’ namely, KP Oil & Gas Company Ltd. to assist Exploration & Production companies. With small funds and large assistance from Government of Khyber Pakhtunkhwa millions of barrels oil and millions of cubic feet of gas to be explored.

• Government of Khyber Pakhtunkhwa eyeing on billions of Royalty, Windfall Levy, Production Bonus, economic activities, tax etc.

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Oil & Gas Sector

• OGDCL, PPL, MPCL, GHPL• Instead of 100% Equity into P1 (Surface

facilities). They may sell Share/borrow money to construct the Surface Facilities. Saved money to be invested in Exploration.

• A number of international investing companies are willing to invest at Development stage taking risk as well.

• Leverage GIDC

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Recommendation

1. Capacity Building at provincial and federal levels and academia

2. Re-visit Policies, Rules & Acts3. Finance Division, Planning Commission, NEPRA,

PPIB, NTDCL, PESCO, M/O Water & Power, DG PC, MPNR to facilitate

4. Fast Track PPA, IA, Tariff Determination (LRMC)5. Crack Team of Federal and Provinces, PEPCO

System, NEPRA, SECP, SBP, FBR, 6. Technical Assistance from ADB, WB, USAID etc.

15KHYBER PAKHTUNKHWA OIL & GAS COMPANY LIMITED (KPOGCL)

ThanksQ&A

RAZIUDDIN (RAZI)CEO

KP Oil & Gas Company Ltd. (KPOGCL)Cell +92 300 500 1038, +92 333 538 0240

Phone: +92 91 5615142-8 Fax: +92 91 5615149Email: razi.ceo@kpogcl.com.pk

Peshawar, PAKISTAN