LAHORE – Pakistan has to adopt suitable financing mechanism for energy efficiency improvement projects besides remodelling country’s overall energy demand and supply situation.
An in-depth assessment of energy efficiency market and economy of Asian Development Bank (ADB) to be completed by next month, pointed out that the country terribly needed an integrated energy model, which can help planners in assessing the impact of various policy scenarios and support good decision-making. ‘Pakistan currently does not use such an integrated energy modeling tool, advanced computer software applications, which is available in the international market’ the report suggested.
The report on the assumption that the government is committed to reforms, pointed out lack of evaluation process as financial barriers toward financing energy efficiency projects.
Reviewing the experience of the past and ongoing programs with financial support to energy efficiency projects, it draw lessons of success and difficulties of those programs as lack of capacity of local financial institutions with respect to providing funding to energy efficiency projects.
The report suggested formulating plan for upgrading the capability of local financial institutions with respect to risk mitigation and project appraisal, which could fill the need for appropriate financing for energy efficiency projects; assessing the capability of local financial institutions;
The report is being conducted consultations with stakeholder, potential borrowers from industry, owners of commercial buildings, utilities, municipalities, and local financial institutions (discussions will focus on the potential demand for financing and, and the most efficient means way if designing its structure and operations)
The report pointed out that financial analysis of projects should be conducted in accordance with ADB’s guidelines for Financial Management and Analysis of Projects (2005);
The report said that there are lack of performing financial impact analyses of the projects to determine their financial rates of return, identifying all risks to project revenue and costs for conducting relevant sensitivity analyses. The report stressed the need for preparing, together with the engineer, an entire project cost estimate, separating foreign exchange and local currency, including physical and price contingencies, interest during construction, commitment fees, and other financing charges.
The report said that audited project accounts of proposed project entities needed to determine proper accounting and cost control by assessing proposed project entities’ financial management capabilities, including a review of earlier ADB and other lender studies
The report is in process of preparing required reports containing findings, recommendations, and all other outputs of consulting assignment, including assisting in preparation of relevant sections of the RRP and appendix to the RRP. These reports will briefly summarize past historical and projected financial performance, which will include 10-year pro forma financial statements (balance sheet, income statement, statement of cash flows) for proposed project entities. Pakistan lacks a comprehensive energy efficiency development road map and investment programme and international experience indicates that the effective implementation and incorporation of energy efficiency into the policy mainstream requires concerted, long-term action and commitment.
The report further pointed out that Pakistan’s gas distribution system is ageing and is suffering from high technical losses (25-30 percent in some areas compared to industry standard 5 percent) that could be eliminated by replacing medium and low pressure pipes with more efficient, corrosion-free pipes. Natural gas accounted for half (43 billion cubic meters) of Pakistan’s primary energy supply in 2006.
Source: The Nation, 21/6/2008