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Conference held at GTZ Head Quarters Germany, to inform investor of investment opportunities in Hydropower in Pakistan

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Arbeitspapier Nr. 3 Public Private Partnership im Infrastrukturbereich

Wasserkraft-Projekte in PakistanVerlaufsprotokoll eines RoundTable-Gesprchs zwischen Unternehmen und pakistanischen Regierungsvertretern Eschborn, 18. August 2000

Die zunehmende Zusammenarbeit von Staat und Privatwirtschaft, die meist mit dem Begriff Public Private Partnership (PPP) beschrieben wird, kann gerade im Infrastrukturbereich entwicklungspolitisch sinnvoll sein, wenn dadurch der zustzliche Transfer von Kapital und Know-how ermglicht wird. Im Rahmen der Schriftenreihe Arbeitspapiere PPP im Infrastrukturbereich sollen in loser Abfolge Beitrge verffentlicht werden, die sich theoretisch oder praktisch mit dem Thema PPP im Wasser-, Energie- und Transportbereich auseinandersetzen. Die Grundidee ist, dass mit dieser Schriftenreihe ein Diskussionsforum etabliert wird, welches den Austausch von Positionen und Erfahrungen hinsichtlich des praktischen Umgangs mit PPP im Infrastrukturbereich im Rahmen der Entwicklungszusammenarbeit ermglicht. Die Papiere geben dabei die persnliche Meinung der Autoren wieder und stellen nicht die Position der sie verffentlichenden Institutionen dar.

Impressum Herausgeber: Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ) GmbH Dag-Hammarskjld-Weg 1-5 65760 Eschborn Telefon (06196) 79-1378 Telefax (06196) 79-6320 E-mail: jochen.rudolph@gtz.de Verantwortlich: Abteilung 44 Umweltmanagement, Wasser, Energie, Transport PN 98.2003.6 PPP im Infrastrukturbereich

Redakteur: Marek Wallenfels

Nummer 3 Oktober 2000

Wasserkraftprojekte in Pakistan

Content

Page 1. Context 2

2. Welcoming address of Mr Wolfgang Schmitt, Executive Director, Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ)

3

3.

Speech of Mr Zafar Ullah Khan, Federal Secretary of Water and Power, Government of Pakistan

5

4. Speech of Mr Ejaz Qureshi, Additional Chief Secretary of North-West Frontier Province (NWFP)

7

5.

Speech of Mr Javed Rashid, Chief Power Economist, GTZ Power Development Programme

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6.

Minutes of Meeting

12

7.

List of Participants

19

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PPP im Infrastrukturbereich Arbeitspapier Nr. 3

1.

Context

The Government of Pakistan must and will enhance its institutional framework to attract foreign direct investment into its energy sector. This is the key message driven from a round-table discussion between German companies and representatives from Pakistan. The meeting was initiated by the Private Participation in Infrastructure (PPI)Project of the Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ) and took place on August 18, 2000 in Eschborn/Germany. Mr. Zafar Ullah Khan, Secretary of State in the Ministry of Water and Power, Mr. Ikram Khan, Additional Chief Secretary of the North Western Province, and Mr. Javed Rashid, Chief Power Economist of the GTZ Power Development Programme, presented five potential hydropower projects in Pakistan that have been identified with the support of the GTZ Power Development Programme and which are planned to be developed under the leadership of the private sector. More than 20 participants from the German business community responded positively to the projects in general but stressed firmly that investment decisions are taken on the grounds both of the projects financial viability and the general framework conditions. Especially investment in infrastructure faces a high risk due to long amortisation periods and the huge amount of capital involved. At present international investors prefer to hold back their investment and watch the development regarding the political and legal framework in general and the solution of recent conflicts in the power sector in Pakistan in particular.

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Wasserkraftprojekte in Pakistan

2.

Welcoming address of Mr. Wolfgang Schmitt, Executive Director, Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ)

Pakistan is endowed with a considerable amount of hydropower potential. In 1999 more than 40 % of the national electricity generation was based on hydropower. It was after the conclusion of the Indus Water Treaty in 1960 that most of this potential was developed on main rivers. By 1978 hydropower had reached a major share in electricity production in Pakistan. In these projects hydropower was put in a broader context: Power was usually one aspect within integrated projects that simultaneously dealt with irrigation, flood-control and water-safety issues and hence concerned a broad array of social, environmental and especially political aspects. The eye-catching symbol of these projects were large dams on main rivers. An example from Pakistan is the Tarbela Dam. Due to political decisions the development of the hydropower potential stopped and thermal power increased its share in electricity-production. But this situation is not satisfying neither from an environmental nor from a commercial point of view. Nevertheless there is a wide variety of potential sites for hydropower projects in existing irrigation canal systems and in the mountainous regions. These developments do not need large dams for water storage and for irrigation purpose. They are single purpose hydropower projects. Initially there was no indigenous Pakistani institution capable of taking up such projects. This was an ideal field for GTZ to step in and support development of such institutions and to assist them to take care of this potential. This was started in 1984 and now we have reached the stage that hydropower projects could be realised. Pakistan Government intends to do so and needs private investment and know-how to realise this, independent power producers who take up such projects on base of BOOT (built own operate and transfer). As already mentioned the development of hydropower potential is complex and complicated, especially in those countries that the international financial markets consider to be relatively risky. The main task in order to enable new investments will be to share the risks and benefits of new hydropower projects in a fair way. This means that the players involved have to accept mutually the political, social, environmental and commercial constraints. An innovative approach in dealing with the complex issues involved in hydro development is the World Commission on Dams a multi-stakeholder forum that aims at developing internationally-accepted standards for decision-making in the planning, design, construction and decommissioning of dams. The World Commission on Dams (WCD) will soon present a "Code of Conduct" for implementation in future hydropower projects. If this Code of Conduct is widely accepted it will be an important step towards reducing social and political conflicts in future

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PPP im Infrastrukturbereich Arbeitspapier Nr. 3

projects for hydro and power development. This WCD "Code of Conduct" will this is at least what private companies, international financial institutions and NGOs contributing towards this process expect - decrease investment risks by means of both increasing transparency and the involvement of stakeholders into the planing process. We strongly support the view that commercial, environmental and social goals can not only be attained simultaneously but even reinforce each other. The high-head hydropower projects that will be presented today are in a way much easier to handle than large dam projects, as many typical social and political conflicts can be avoided. At the same time the financial burden is comparatively lower. In the case of high-head hydropower, neither high dams nor large reservoirs are required. This means less works on the surface than for traditional dam projects with large reservoirs thereby minimising the necessity for both displacement of persons and submerging of valuable land. All in all we can say that from an environmental and commercial point of view the projects that will be presented have a high potential. But since public funds are short all over the world, so in Pakistan, private investment is required. And private capital will only be invested if there is confidence between the partners. Confidence in the planning design, the project assessment and the overall framework. We certainly have learnt from experience and I understand that policies have now been set by the Government of Pakistan and the Provincial Governments to create transparent procedures that all players will trust. To set and maintain such policies carefully is a not an easy task for any Government. However, it will pay off dearly to the national economy. It is part and parcel of good governance, that we all desire so much. This is why we can rightfully say that the projects presented today have potential, yet the conducive conditions for their realisation of this potential need to be created and maintained. I am happy that with the attendance of high-ranking representatives from Pakistan and from the German business community a new dialogue can be started. And I am sure that if both sides will accept each others goals the common goal to develop the hydropower potential in Pakistan can be reached. This is all the more important, since hydropower is both a financially viable, renewable and emission free source of energy that can provide Pakistan with the energy needed for her future economic and social development.

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Wasserkraftprojekte in Pakistan

3.

Speech of Mr Zafar Ullah Khan, Federal Secretary of Water and Power, Government of Pakistan

First of all, I would like to thank you for coming here to attend this meeting and to share with us some information which certainly must be of interest to you and every person who is interested in development of clean energy. And allow me to tell you something: Pakistan has