“Pakistan does not require electricity; it requires cheap electricity”
Published in Mar-Apr 2022
ZEENAT CHAUDHARY: How is the Water and Power Development Authority (WAPDA) structured?
MUZAMMIL HUSSAIN: When WAPDA was established in 1958, the Tennessee Valley Authority’s (TVA) model was used as the base for its business structure. The TVA model’s legal and constitutional position allows WAPDA to be an independent authority in terms of financial power. The Authority comprises three members – Water, Finance and Power – and a chairman with the decision-making power over all WAPDA related projects. Water employs technical expertise to conduct feasibility studies on potential dams and creates detailed engineering designs for hydropower installations. Based on these studies, Finance analyses the engineering designs and lays out cost estimates for a project. This initiates the procurement process, which includes hiring consultants and mobilising contractors. When a project is completed, it enters the operation and maintenance phase and becomes the responsibility of Power, which manages the technical capacity of the installation, power generation, upgrades and obtaining any foreign funding required for maintenance and other purposes.
ZC: How does WAPDA distribute hydropower energy?
MH: A grid station is built near the dam from where transmission lines are drawn (via towers). This is called ‘evacuation of power’ (loading the electricity). Until 2005, WAPDA was responsible for distributing the power, a function that has now been taken over by the National Transmission and Dispatch Company (NTDC). The independent power producers (IPPs) and the solar and wind producers evacuate electricity to the Central Power Purchasing Agency (CPPA), which then supplies the electricity to distribution companies (DISCOs) for onward distribution to end consumers.
ZC: How is a location for a dam identified?
MH: In Pakistan, you can only construct dams up north in the mountains, keeping in view the storage space required and availability of water. There are three fundamental requirements. Hydrology; the availability of a river/water body suitable for a dam to be built. Geotechnology; whether the rocks can support the construction of a dam; and seismology, the likelihood of earthquakes in the area. We also evaluate whether the area is accessible in terms of manpower and machines and investigate resettlement procedures and the costs involved.
ZC: What are the challenges in installing, maintaining and running hydropower plants?
MH: Two main challenges need to be addressed. They have a long gestation period (five to 10 years) and are initially capital intensive. To build a dam, a huge capital investment (approximately Rs 800 billion) is required. Dams like Tarbela and Mangla were built with the support of the World Bank as an outcome of the Indus Basin Treaty, after which no further dams were constructed. However, as the need for power increased (population growth, expansion of cities), governments signed agreements with IPPs. Most of these involve fossil fuel and oil, and produce energy at a more expensive rate than hydropower.
ZC: What does Pakistan’s water landscape currently look like?
MH: Under the Indus Water Treaty, Pakistan’s water is sourced primarily from the Indus, Jhelum and Chenab rivers. Pakistan also gets water from India’s Ravi, Sutlej and Beas rivers; about six to seven million acre feet (MAF) annually. Every year, the water accumulated in the Indus Basin equals an annual quantity of 140 to 150 MAF of freshwater. However, unfortunately, the storage capacity is only 13 MAF – a criminally low average compared to the rest of the world, where the average is 40 MAF – and this is due to the fact that for the last 50 years we have not built any dams or storage facilities. Moreover, the variability factor regarding when water is available adds to the low rate; 80% of the water comes between June and August when the ice caps melt.
ZC: Although cheaper, does hydropower have a higher negative environmental impact?
MH: Let me give you an example of how we protect the environment when building a new dam. Take the Diamer Basha project; the total spend is Rs 78 billion and includes spends on fisheries, forest development, schools and medical units. The cost of resettlement, human safety and climate assessment are all built into our projects.
ZC: What hydropower projects is WAPDA currently working on?
MH: We are working on projects worth Rs 2.6 trillion. We receive 22 to 23% of this amount annually from the government, spread over the project’s construction period, and the balance is arranged by WAPDA from equity and investments. We are working on sites in Bunji, Dasu, Diamer Basha, Kalabagh, Mohmand, Shyok, Skardu, Tungas and Yulbo. In the last three years, we have completed four projects – Golen Gol, Kachi Canal, Neelum Jhelum and Tarbela 4 – following which we added seven billion units to WAPDA’s share. We are producing almost one-third of Pakistan’s electricity. I must emphasise the fact that Pakistan does not require electricity; it requires cheap electricity. We sell the 37 billion units we produce for Rs 3.15 per unit, whereas the IPPs charge between Rs 22 and 24 per unit. If we increased our prices, electricity will be even more expensive. The current share of hydropower is 30% and we must take it to 40 to 45%, and ultimately 50%. How will this happen? As we speak, we are working on 10 projects – including Dasu, Diamer Basha in Gilgit-Baltistan, Kachi Canal in Balochistan, Mohmand in KP and Nai Gaj in Sindh. Some will be completed in 2024, some in 2026, and the biggest one, Diamer Basha, in 2028. This will add at least 11,000 MW (44 billion units) to the mix and that will be when Pakistan will be able to produce cheap electricity with the help of a solid energy mix. This will also make the power industry more competitive; agricultural exports will increase and consequently economic and food security.
ZC: How are these projects funded?
MH: Other than government support and our own equity, they are financed by a $26 billion foreign currency component which we obtained from the UK. WAPDA was recently evaluated by the world’s top three credit rating agencies (Moody’s, Fitch and S&P) and they all gave us a stable outlook (no government institution or private company in Pakistan has obtained a credit rating from all three). As a result, we don’t need the government’s guarantee to raise funds; in fact, we are raising funds without pledging any assets such as roads or dams. The strength of the rating is based on the robustness of WAPDA’s structure and balance sheet and we ended up raising $500 million in June 2021. We received offers worth three billion dollars after we launched a green Euro bond in London.
ZC: Is the government’s goal to increase hydropower’s share of the energy mix, from 27.17% (June 30, 2017), to 33.25% by June 30, 2025 realistic?
MH: Absolutely. When the Mohmand and Dasu projects are completed in 2025 and 2026, they alone will increase the percentage significantly.
This interview was conducted in the first week of April 2022 before Lt Gen. Muzammil Hussain (Retd) resigned from WAPDA.
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