Energy sector ridden with stagnant power generation – Topline Research
By: Topline Securities (Private) Limited
Perpetual power shortages have caused Pakistan’s economy to underperform in the last few years. According to recently published Pakistan Energy Yearbook by Ministry of Petroleum and Natural Resources, country’s installed generation capacity stood at 22,797MW at the end of FY12 which is up 1.4% from last year and up 17% compared to FY08. However, many factors including the circular debt have restricted electricity generation in the country.
In FY12, gross generation stood around 10,855MW, stagnant in comparison to FY11. However, the generation was only 48% of installed capacity. Unfortunately, the gross generation in FY12 is down 1% from FY08 thereby caused severe power shortages and affected the industrial backbone of the country.
With change of realm, we expect that the new incumbent government is likely to take power shortage issue on priority basis and take much needed power sector reforms.
Generation tilting towards thermal
The occurrence of such low generation came with no surprise as 68% of the country’s total electricity generation capacity was based on thermal generation in FY12. Although, the proportion of thermal is in line with FY11 but it compares unfavorably with 64% in FY08. The remaining 32% capacity is split between 29%on hydel and 3% nuclear, as per FY12 statistics. Inclusion of more expensive thermal capacity in the generation mix has further aggravated the problem of circular debt by pushing up the cost of electricity generation.
About the actual generation mix, thermal contributed 64% of total electricity generation (up 1% from FY11) while hydel contributed 30% (down 4% from FY11).
FO continue to dominate the share
While dependence on expensive thermal generation was bad enough, production mix within thermal is dominated by more expensive fuel oil. FO contributed 55% of total thermal generation in FY12, slightly lower than the FY11 but up 7% from FY08. Gas contribution improved to 45% in FY12 from 44% in FY11 but is down 52% from FY08.
T&D losses continue to be an ‘Achilles heal’
T&D (Transmission and distribution) losses are another problem area adding to power sector woes. In FY12, T&D losses as a percentage of net supply (adjusting for imports and auxiliary consumption) stood at 17.3% (16,054 GWH) which is higher than 16.6% (15,315 GWH) registered a year earlier.