Potential & Opportunities in Energy Sector

Electricity sector is the backbone of the economy of Pakistan and plays a key role in channeling the country’s progress towards the long-term sustainable development pathway.

The challenge to achieve and maintain the desired economic growth of the country can only be tackled by providing reliable, sustainable, and affordable electric power services to all sectors of economy.

Enhancing the share of electricity based on indigenous energy supplies is crucial to ensure energy security, self-reliance, affordability, sustainability and reduction in dependency on the imported fuel based generation.

With over 40000 MW of Installed Generation Capacity ( More than 50% owned by Private Investors), an integrated Transmission & Distribution System, a mature Regulatory Framework & Well developed Power Policy Framework for Private Sector Investments with attractive investment returns on offer.

Pakistan presents a viable landscape for fresh investment from Private investment in multiple avenues of Generation and Transmission Assets.

1 TAX EXEMPTIONS Income Tax, Turnover Tax, Sales Tax (Depending on project type/tech)
2 IMPORT CONCESSIONS On Project Plant & Machinery
3 CORPORATE STRUCTURE 100 % Foreign Ownership Allowed
4 GOP GUARANTEES For Payment Obligations of Power & Transmission Services Purchaser(s)
5 PROTECTION Force Majeure & Change in Law
6 HYDROLOGICAL RISK On Power Purchaser
7 ATTRACTIVE ROE IRR based indexed for USD/PKR variation determined by NEPRA
8 TARIFF INDEXATION Inflation (US CPI & Pak WPI), foreign costs USD/PKR parity
9 FX Regime GoP assures conversion of PKR to USD & remittance of foreign exchange
10 PPA/TSA TERM 25-30 Years depending on the project
11 DISPUTE RESOLUTION Three tier mechanism:
1. Mutual discussions between parties
2.Determination by Expert
3 Arbitration under LCIA/UNCITRAL Rule; Pakistan if Dispute amount < USD 10 Million & London if amount > USD 10 Million
12 GOVERNING LAW Pakistani Law for IA & PPA / TSA
English Law for DIA where Foreign Lenders are Involved

Salient features of the Oil Refining Policy 2023 for greenfield refinery

All new deep conversion oil refinery projects, to be set up anywhere in the country, that achieve financial close of the project before December 31, 2027, shall be eligible for the following major incentives:

i. Exemption from all taxes on income accruable in relation to project shall be 20 years for minimum 300,000 bpd refinery and 10 years for minimum 100,000 bpd refinery, effective from the date of commencement of commercial production of the project.
ii. Exemption of all custom duties, withholding income tax and sales taxes on plant and machinery imported into Pakistan in relation to the project construction and execution without any precondition for obtaining certification by Engineering Development Board
iii. Imposition of the custom duty at least at 7.5% on imported MS and HSD for 25 years and 10 years as tariff protection to generate revenue for the refineries, for 300,000 bpd and 100,000 bpd refineries respectively
iv. The refineries shall be free to import crude oil from any source.
v. Refineries will be allowed to export surplus petroleum products that do not have domestic demand under intimation to OGRA and MEPD

Power Generation and Transmission policies are implemented through Private Power Infrastructure Board (PPIB), for further information. Please visit www.ppib.org.pk

Power sector in Pakistan is regulated by National Electric Power Regularity Authority (NEPRA), an independent regulatory body, for further information please visit www.nepra.org.pk

Oil & Gas sector in Pakistan is regulated by Oil & Gas Regulatory Authority (OGRA), an independent regulatory body, for further information please visit www.ogra.org.pk