Day: August 4, 2021

Highlighting the need for investment in Karachi’s power sector for the continued growth of the city, K-Electric (KE) shared that the utility had submitted a revised investment plan of around Rs. 440 billion for the tariff control period of 2017- 2023.

Per the Multi-Year Tariff 2017 – 2023 (notified in May 2019) determined by NERPRA for KE, the utility was allowed an investment plan of Rs. 299 billion. Subject to regulatory approvals, KE has submitted plans to make additional investments to the tune of around Rs. 140 billion more than allowed by NEPRA.

The revised investment plan was developed keeping in mind the dynamic and challenging environment we operate in. This plan aims to ensure Karachi’s power infrastructure can cater to the rapidly growing energy needs of the city and its adjoining areas, invest in network reliability and safety initiatives while also driving fleet efficiency.

Commenting on the plans, Moonis Alvi, CEO K-Electric, shared,

The additional investment is critical to meet the requirements of Karachi, which continues to expand rapidly compared to other urban centers. This additional investment is also required to improve the resilience of KE’s system against inclement weather and the impact of climate change, and is, therefore, critical to ensure the continued supply of safe and reliable power to our 3.2 million customers.

It is pertinent to note that KE has already invested over Rs. 255 billion as of 2021 since the start of the tariff control period. KE’s 900 MW RLNG-based power plant at a cost of around USD 650 million is expected to be completed by the end of the calendar year 2021. This project is pivotal in meeting the city’s future demand growth. Since privatization, KE has also doubled its transmission and distribution capacity and achieved a significant reduction in T&D losses through effective loss reduction strategies.

Going forward, KE is working with the Federal Government to build 500kV and 220kV interconnections at key locations where KE’s network connects with the National Grid, thus enabling the utility to off-take up to 2,050MW additional power from the National Grid, which currently has an excess of generation capacity. With support from the Ministry of Energy, NTDC, and CPPA, and under guidance from NEPRA, KE managed to off-take additional power from the National Grid, which enabled KE to ensure smooth operations during the summer of 2021.

Further, coupled with the rapid installation of Aerial Bundled Cables that have resulted in good results in curtailing theft, KE also plans to expand the deployment of Automated Meter Readers on its network, which improves visibility of the network and provides greater transparency. The combined impact of these potential investments in generation, transmission, and distribution is expected to enable exemption of load-shed from around 78 percent of the city today to more than 90 percent by 2023.

Since the tariff determined by NEPRA is a cost-plus tariff, KE’s investment plans are limited to those costs allowed as recoverable in the tariff. The allowance of these plans has no direct impact on the customer end tariff. On the other hand, if excluded, this could impact KE’s ability to seek funding for these projects, thereby adversely affecting the customers, particularly new connections, as well as safety and reliability up-gradation projects.

Alvi further shared,

We understand that Karachi is a complex and unique city and its transformation requires an aggressive and targeted capital expenditure strategy. We envision that our plan will spur progress in the city and enable us to continue the upward momentum we have developed since privatization. Our investment plan has also been revisited and enhanced in line with the evolving global economy, which has been affected by several factors, including a global pandemic.

CEO K-Electric, Moonis Alvi, concluded,

KE is committed to the future of Karachi, and our customer experience is at the core of our business decisions. This is why we have not shied away from injecting money to add more grids and transformers, and also incorporating a 900 MW highly efficient generation plant in our fleet. I’d like to thank the Board of Directors for their support, which enables us to be at the forefront of serving the city. These investments are becoming absolutely essential in today’s world, where the impact of climate change can no longer be ignored. Making our systems robust, safe, and reliable is among our top priorities. We are working with all stakeholders and sincerely hope to be able to deliver on our vision for Karachi

 

Since privatization, KE has been demonstrating its motivation and commitment to drive socio-economic progress by going above and beyond for the residents of Karachi and its adjoining areas. Aggressive investments of over USD 3.8 billion since privatization have enabled a drastic reduction in transmission and distribution losses, making KE the most improved distribution company in the country. Exempting industries from load-shed since 2010 has directly contributed to Pakistan’s GDP growth while also increasing employment opportunities.

The percentage of the city exempt from load-shed has also risen to almost 78 percent on the back of additions in KE’s generation capacity, doubling of KE’s transmission and distribution network, and a significant reduction in losses.

 

Source: Pro Pakistani

The Federal Board of Revenue (FBR) has notified September 1, 2021, as the effective date for applicability of the 2% sales tax of the gross value of supplies on the online market place.

The FBR on Wednesday issued S.R.O984(I)/2021 for the imposition of Withholding Tax on online market place under eleventh schedule to the Sales Tax Act, 1990.

From September 1, 2021, the online market places facilitating the supply of goods owned by third party suppliers are required to withhold sales tax at the rate of 2% of gross value of supplies made by persons other than active taxpayers.

According to the notification, S.R.0.90 (1)12021.— In exercise of the powers conferred by sub-section (7) of section 3 of the Sales Tax Act, 1990, read with proviso to the entry in column (4) against S. No. 8 in the Eleventh Schedule to the said Act, the Federal Board of Revenue is pleased to direct that the provisions of S. No. 8 of the Eleventh Schedule to the Sales Tax Act, 1990 shall be effective from September 1, 2021, it added.

Under the Finance Act 2021, the provisions of this entry shall be effective from the date as notified by the Board. Now, the FBR has notified the date for this purpose, and issued a notification for effective date of sales tax on supplies through online market place.

The Federal Board of Revenue (FBR) has defined that the “online market place” would cover e-commerce platforms, portal sor similar means, which facilitate sale of goods, including third party sale.

According to the Finance Act 2021, the “online market place” includes an electronic interface such as a market place, e-commerce platform, portal or similar means, which facilitate sale of goods, including third party sale by controlling the terms and conditions of the sale; authorising the charge to the customers in respect of the payment for the supply; or ordering or delivering the goods.

The 2% sales tax of gross value of supplies would be applicable on the online market place (persons other than active taxpayers), provided that the provisions of this entry shall be effective from the date as notified by the board, the Finance Act 2021 added.

 

Source: Pro Pakistani

Federal Minister for National Food and Security, Syed Fakhar Imam, while addressing a press conference, said that the government of Pakistan has approved cotton intervention price. He said, “If prices fall below Rs. 5000/40kg of seed cotton then the intervention policy will be activated.”

Federal Minister said that the procurement will be set as 90 percent of the import parity price (IPP). Furthermore, he said, “Ministry will constitute a ‘Cotton Price Review Committee,’ which will monitor cotton price in the country. This committee will direct the TCP to start procurement if prices fall.”

 

He continues that TCP will initially procure 200,000 bales of cotton. He said that it would ensure that farmers get directly benefited from its procurement. Minister hoped that it would stabilize cotton prices in the country.

Fakhar said that the government is working on a cotton revival program which will be introduced soon. He said the primary aim of this program is to provide quality input for cotton, especially cottonseed and pesticides, in addition to modernization of ginning technology.

 

Source: Pro Pakistani

The Government of Pakistan, through the Privatization Commission, intends to divest 60,000,000 (20 percent) shares of Pakistan Reinsurance Company Limited (PAKRI or ‘the Company’) via a Secondary Public Offering using the 100 percent Book Building Method.

According to the draft prospectus, the shares will be offered by conducting 100 percent Book Building. Successful bidders will be provisionally allocated 75 percent of the Offer size (45 million shares) and 25 percent of the total transaction (15 million shares) will be issued to the general public.

Any unsubscribed shares from the general public portion will be allotted to successful bidders on a pro rata basis.

Since PAKRI is a listed entity, the Floor Price of the Offer will be disclosed close to the commencement of Book Building. The Floor Price, after approval by the Privatization Commission Board and Cabinet Committee on Privatization (CCOP), will be notified through the websites of the Pakistan Stock Exchange, Habib Bank Limited, and Next Capital Limited.

PAKRI is the sole reinsurance company of Pakistan and was incorporated in the country as a public limited company in 2000. In 2001, it took over all the assets and liabilities of the former Pakistan Insurance Corporation (PIC) formed under the PIC Act, 1952, in order to support the local insurance industry. It is a public sector company working as an autonomous body under the Ministry of Commerce, Government of Pakistan, and its prime objective is the development of insurance and reinsurance business in the country.

As the national reinsurer, it provides reinsurance protection to the local insurance industry in view of the treaty and facultative business.

By providing reinsurance services locally, PAKRI enhances the foreign exchange retention capacity of the country. It is also collaborating and participating with its international counterparts in the field of reinsurance.

This is being achieved under the aegis of the Economic Cooperation Organization (ECO) with the objective of reducing the outflow of foreign exchange and improving the standard of insurance and reinsurance services in the region. PAKRI is also one of the pioneers and founding members of the Federation Afro-Asian Insurers and Reins.

The Government of Pakistan holds approximately 45 percent of the shareholding in the Company through the Ministry of Commerce.

Since this Offer is being made through 100 percent Book Building with 25 percent allocation to retail investors, the underwriting of the retail portion is not needed. In case the Offer remains unsubscribed, the unsubscribed shares shall be allotted to the successful bidders on a pro rata basis. The successful bidders have already given undertakings to subscribe to such unsubscribed shares on a pro rata basis.

The principle revenue driver of PAKRI is the growth in the non-life insurance industry which is mainly driven by economic growth. As business activity grows, the demand for insurance also increases, which in turn, leads to generating demand for the reinsurance business.

Pakistan has started showing signs of economic development with a 26 percent increase in income per capita from FY10 to FY19, reaching USD 4,884 per capita on a PPP basis. The ease of doing business in Pakistan has also improved as according to World Bank’s Doing Business Index 2020, it was among the ‘top ten best improvers’ and has clinched its highest rank in 15 years owing to significant reforms in the areas of starting a business, registering property and resolving insolvency.

As businesses prosper, the demand for insurance will grow, ultimately increasing the demand for reinsurance. Being the only domestic reinsurance company, PAKRI is well-positioned to capture any anticipated growth in the insurance industry.

Future Outlook

During recent years, PAKRI’s gross premium has increased to Rs. 17-18 billion as compared to Rs. 8-10 billion in 2014-18. This huge growth is mainly attributed to new power projects reinsured during the period.

More projects are expected to be developed under the CPEC initiative providing a potential revenue stream for the Company. In addition, the Company launched its Retakaful business in 2018 and underwrote Rs. 424.8 million in 2019 and Rs. 603 million during 2020.

As per the Insurance Association of Pakistan (IAP) Yearbook 2019-20, there are three general takaful companies with 22 window takaful operations. PAKRI is yet to capture this entire market that will increase the contribution of the retakaful window.

PAKRI owns a diversified portfolio invested in debt securities, equity securities, mutual funds, and investment property. It manages these investments in-house, except for mutual funds that are outsourced to leading asset management companies.

 

Source: Pro Pakistani

Special Assistant to the Prime Minister on Energy and Petroleum, Tabish Gauhar, wrote a letter addressed to Minister for Energy, Hammad Azhar, proposing to chalk out strategies for holistic and structural reforms in the energy sector.

The SAPM wrote a letter with the title “Beyond The Fire Fighting – Proposed Strategic Workstreams In The Energy Sector,” Dawn News reported.

Copies of the letter have has also been sent to Prime Minister Imran Khan, Finance Minister, Shaukat Tarin, Minister of Planning, Development and Special Initiatives, Asad Umar — who is also the chairperson of the Cabinet Committee on Energy (CCoE) — and petroleum and power secretaries.

Gauhar accentuated the need for headway on the 1,100 kilometer-long gas pipeline running from Port Qasim in Karachi to Lahore. The statement of the letter read, “In my humble opinion, this gas pipeline project should be financed by the Rs. 321 billion Gas Infrastructure Development Cess funds already raised from the public for this very purpose and not from third party debt and equity that will add on to the gas consumer bill.”

Gauhar has been reportedly against the pipeline contract and was also absent from the signing ceremony last month. In his letter to Azhar, he has warned that if the Russians are given veto right on the design and construction of the pipeline, they will inevitably choose larger diameter (56-inch) pipe, for which Pakistan’s Sui companies don’t have a track record.

Gauhar wrote, “…according to our local analysis, we can meet the projected gas demand for the next 10-15 years with a relatively smaller (42-inch) diameter pipeline at a potentially lower upfront project cost (savings of up to $500 million) and quicker timeline (2023 versus 2024 completion).”

On the subject of electricity load shedding, Gauhar said that notwithstanding the “excess capacity” syndrome, recent supply-side challenges once again showed the weaknesses in the energy ecosystem, especially during peak hours. He suggested speeding up of privatization process of public-sector power plants to resolve this issue.

The SAPM also urged the Energy Minister to “commission an independent audit of those thermal IPPs (independent power plants) that were not available when we needed them the most and yet charge take-or-pay capacity payments throughout the year.”

Gauhar pointed out that there are serious governance and human resources issues in the petroleum sector, and while they may not be apparent right now, they are deeply and adversely affecting the Petroleum Division’s policy and oversight functions.

He also advocated for the transfer of some regulatory powers from OGRA towards OGRA and the upcoming R&P authority.

The SAPM also shared his thoughts and suggestions on other key issues related to the LPG sector, circular debt, and other power sector issues in his letter.

 

Source: Pro Pakistani