PPP 2023-24 VS

ARZACHEL
EMPOWERING YOUR ENERGY STRATEGY, TOGETHER
2024-25 ANALYSIS

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PPP = POWER PURCHASE PRICE
WHAT IS PPP?
PPP = Power Purchase Price, EPP = Energy Purchase Price, CPP = Capacity Purchase Price, UoSC = Use of System Charges of Transmission, MoF = Market Operator Fee

The major portion of the end-consumer tariff comprises the Power Purchase Price (PPP), which accounts for over 90% of the total revenue requirement
of the sector. The PPP is a pass-through item and primarily consists of the following components:

US$/PKR Exchange Rate

ENERGY PURCHASE PRICE
Fuel Prices REASONS FOR PPP PROJECTIONS
PPP references are determined yearly, by
adopting a forward looking approach, to
account for impact of new capacities,
currency fluctuations, change in fuel price,
variation in interest rate, CPI etc.

PPP
 Monthly FCAs and qtr. adjustments are

PPP PPP = EPP + CPP + UoSC + MoF worked out based on these PPP
references.
 To minimize the impact of monthly
FCAs & quarterly variations.
US$/PKR Exchange Rate  To provide a more predictable tariff.
 References remain applicable unless
new references notified.
KIBOR

CAPACITY PURCHASE PRICE

LIBOR

US & Pak CPI

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Arzachel can develop various energy procurement solutions and
optimize the energy mix to reduce energy input costs for consumers.
CPPA ASSUMPTIONS FOR FY 2024-25
These are the assumptions which CPPA have used in consideration of PPP FY24-25 Forecast reference

Demand Scenarios XW Discos & KE Allocation Economical Parameters

3% 5% 9% FY KIBOR Pak Inflation LIBOR US Inflation

Growth
Rate
Growth Growth 27%
Rate Rate

2024-25 21.37% 12.20% 5.31% 2.40%

127,845
122,175
GWh

119,848

Service Charges

11,030
FY UoSC MoF NTDC Losses

Normal High DISCOs Allocation to RS/kW/Month %

KE 2024-25 235.3 3.48 3.05%

Seven scenarios have been prepared for the projection of PPP references for FY 2024-25. Each scenario includes specific assumptions regarding critical
variables affecting PPP including demand growth, exchange rate, hydrology, and fuel prices. These scenarios are outlined in the Table.

Scenarios Demand Exchange Rate Hydrology Fuel Prices

1 Normal 275 Normal Normal
2 High 275 Normal Normal
3 DISCO 275 Normal Normal
4 Normal 300 Normal Normal
5 High 300 Normal Normal
6 Normal 275 Low Normal 3
7 Normal 275 Normal High Imported Fuel Price
SCENARIOS CREATED BY CPPA
CPPA have created seven scenarios (07) regarding Power Purchase Price (PPP) depending upon changes in Demand growth, exchange rates, KIBOR,
LIBOR, Pak CPI and US CPI.

Rs Billion Impact Rs/kWh Impact

3,475 3,548 3,590 27.11 26.95
3,335 3,374 3,417 3,369 25.48 25.33 25.03 26.11 25.74

2,281

17.42

17.13
2,279
2,150

16.33
2,136

16.39
2,147

2,146

16.39

15.49
16.13
Rs Billion

2,146

Rs/kWh
US$/PK: 275
US$/PK: 275
US$/PK: 300
US$/PK: 300

US$/PK: 275
US$/PK: 275

US$/PK: 275

1,324

1,308

1,279
1,267
1,226

1,222
1,188

9.82

9.78
9.69
9.54

9.35
9.09

9.2
Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6 Scenario 7 Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6 Scenario 7

EPP CPP Total EPP CPP Total

Sold to DISCOs Fuel Cost Fuel Cost Capacity Charges Capacity Charges Power Purchase Price Capacity % Fuel Cost %
Scenarios
(GWh) (PKR mm) (PKR/kWh) (PKR mn) (PKR/kWh) (PPP) of PPP of PPP
1 130,876 1,126,191 8.61 2,146,051 16.40 25.48 64% 34%
2 133,205 1,162,080 8.72 2,147,406 16.12 25.33 64% 34%
3 138,872 1,256,095 9.04 2,150,849 15.49 25.03 62% 36%
4 130,876 1,205,236 9.21 2,279,980 17.42 27.11 64% 34%
5 133,205 1,244,040 9.34 2,281,335 17.13 26.95 64% 35% Maximum Values 4
6 130,876 1,214,705 9.28 2,136,854 16.33 26.11 63% 36%
7 130,877 1,160,759 8.87 2,146,052 16.40 25.74 64% 34%
LAST YEAR FY 23-24 PPP APPROVED BY NEPRA
PPP = EPP + CPP = 6.73+16.22 = 22.95
Capacity Purchase Power Purchase
Energy Purchase Price
Sources Price Price
Generation Fuel Cost V.O&M Fuel+ V.O&M Capacity Charges EPP+CPP
GWh Mix % Rs. Mln Rs./kWh Rs. Mln Rs./kWh Rs. Mln Rs./kWh Rs. Mln Rs./kWh Rs. Mln Rs./kWh
Hydel 41,226 29.71% 3,896 0.09 3,896 0.09 282,175 6.84 286,071 6.94
Imported Coal 16,552 11.93% 276,658 16.71 7,723 0.47 284,381 17.18 386,715 23.36 671,096 40.54
Local Coal 22,696 16.36% 223,374 9.84 16,028 0.71 239,402 10.55 304,519 13.42 543,921 23.97
HSD - 0.00% -- -- -- -- -- -- -- -- -- --
FO 2,630 1.90% 60,699 23.08 1,742 0.66 62,441 23.74 65,278 24.82 127,719 48.56
Gas 14,312 10.31% 116,054 8.11 6,584 0.46 122,638 8.57 63,693 4.45 186,332 13.02
RLNG 6,639 4.78% 150,240 22.63 6,170 0.93 156,410 23.56 184,954 27.86 341,364 51.42
Nuclear 25,566 18.42% 26,632 1.04 26,632 1.04 443,291 17.34 469,922 18.38
Import From Iran 66 0.05% 1,627 24.65 1,627 24.65 1,627 24.65
Wind Power 5,212 3.76% 175,336 33.64 175,336 33.64
Bagasse 1,136 0.82% 6,795 5.98 84 0.07 6,879 9,963 8.77 16,842 14.83
Solar 2,563 1.85% - 38,564 15.05 38,564 15.05
Grand Total 138,759 862,079 6.21 42,227 0.3 904,306 6.52 1,954,488 14.09 2,858,794 20.6
Sale to IPP Units / Costs --
Uosc NTDC/PMLTC & Losses 4,236 3.05% 157,862 157,862
Total for DISCOs 134,523 862,079 42,227 904,306 2,112,350 3,016,656
Cost Allocation For K.E 9,662 60,824 3,020 63,844 86,653 150,497
Total Allocation For XWDISCOs 124,861 801,255 6.42 39,207 0.31 840,462 6.73 2,025,697 16.22 2,866,159 22.95

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FY 23-24 CONSUMER END TARIFF
Consumer End Tariff = Generation Tariff + Transmission Tariff + Market Operator Fee + Distribution Margin + Supply Margin

TRANSMISSION CHARGES DISCOS MARGIN

O&M, Depreciation, RoE, Interest,
1.37 3.1 O&M, Depreciation, RoE, Interest,
Rs/kWh Rs/kWh
Other Income. Prior Year Adjustment. Other Income, Prior Year Adjustment

CAPACITY CHARGES 17.01 7.62 ENERGY CHARGES

Rs/kWh Rs/kWh
Fixed O&M, ROE, ROEDC, IDC, Fuel Cost + Variable O&M
Insurance, Debt Servicing etc.

0.01 0.67
Rs/kWh Rs/kWh
MARKET OPERATOR FEE PRIOR YEAR ADJUSTMENT
O&M , Other Income, Prior Year Under/Over Recovery due to delay in
Adjustment notification/over under sales etc.
29.78
Rs/kWh

CPP EPP Transmission Charges MO Fee Disco Margin PYA Total User End Tariff
17.01 7.62 1.37 0.01 3.1 0.67 29.78

CPP and EPP charges revised in NEPRA Consumer End Tariff Order 6
 LAST 9 MONTHS EFFECTED PPP
Effected PPP after Incorporation of Fuel and Quarter Adjustments

Base PPP QTR Adjust FCA Adjust Total PPP

Quarterly Adjustment;
33.33 34.52
32.89 32.38 Basis for determination of Reference Capacity, 0&M,
31.84 31.14
30.30 transmission charges & Variable O&M:
28.62 28.87 27.56
Exchange Rate
26.01 CPI, KIBOR/LIBOR
Total Plants
Rs. kWh

Change in any of the above factor results in Quarterly

Adjustment.

Monthly Fuel Charges Adjustment;

Basis for determination of Reference FCC:

Energy Projections
International Fuel Prices
Base Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Average Exchange Rate
FCA Adjust 1.463 1.7141 0.4014 3.0786 4.1276 4.5671 7.0562 4.9213 2.8372 3.35 Fuel Price Actual Fuel Reference Fuel
QTR Adjust 1.1502 1.1502 1.1502 2.7492 2.7492 2.7492 1.45 1.45 1.45 1.78 Variation = Cost
Component - Cost Component
(FCC)
Base PPP 26.01 26.01 26.01 26.01 26.01 26.01 26.01 26.01 26.01 26.01
Total PPP 26.01 28.6232 28.8743 27.5616 31.8378 32.8868 33.3263 34.5162 32.3813 30.2972 31.14

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EFFECT OF PAST 12 MONTHS ACTUAL GENERATION ON PPP
18000.0 PPP FY 23-24 Simulation on Actual
Generation Data from May-23 till April-24
16000.0 We have run the previous year's PPP model with
actual generation data from May 2023 to April 2024,
keeping other parameters constant. This resulted in a
14000.0 PPP of 27.63, which ultimately amounts to 29 Rupees
per unit cost, including transmission and MO charges.

12000.0

10000.0
GWh

8000.0

6000.0

4000.0

2000.0

0.0
Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24

Hydro Coal Coal - Imported HSD RFO Gas RLNG Nuclear Import (Iran) Mixed Wind Bagasse Solar
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ENERGY SALE COMPARISON – 2022-23 VS 2023-24

23-24 22-23
14,388
GWh GWh Reasons of Reduced Demand
15,472

The overall GDP of the country is low,

and industrial growth is in negative
12,922
13,760 territory. As a result, industrial demand
13,638 has reduced by approximately 10% due
Almost 8% drop in energy
to the declining economy.
sales as compared to last year
GWh

In the past 10 months, at least 7,000 MW

12,520 10,377 of solar panels have been imported into
Pakistan, indicating robust growth in
solar installations.

8,459
9,253 8,073 8,096 8,185
The increasing injection of solar energy
7,516 8% and reduced daytime demand are
reshaping the energy landscape.
7,756
7,288 7,418 7,338
6,876

July August September October November December January February March April May June

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ANALYSIS OF PPP FY 24-25
Scenario 4 variations with different assumptions

29.044
27.95
27.75
27.11
26.73
25.95
Rs/kWh

Scenario 4 Last year Expected 10% Drop in Demand Dollar at 280 280 Dollar with Last 280 Dollar with 10%
Demand Year Demand Drop Demand
SCENARIOS CONSIDERED

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* These scenarios are based on publicly available data. Certain details may not be included due to data limitations.
ANALYSIS OF PPP FY 24-25
PPP Model Evaluation using • The PPP model was run using data from May 2023 to April 2024.
• The calculated PPP for this period is 27.63 Rupees per Unit.
Actual Generation Data: • After including additional costs like Transmission & Market Operator (MO) charges, the total cost per unit is 29 Rupees.

•There has been a 10% reduction in demand over the last year.
•Given the reduced demand, and assuming the same NTDC & MO fees per unit as last year:
Impact of Reduced Demand: •Base PPP: 27.75 Rupees
•Additional Charges: 1.38 Rupees (NTDC & MO Fees)
•Total Expected PPP: 29.13 Rupees per Unit.

PPP Observations using QTR •The average PPP over the last 9 months has been 31.14 Rupees per Unit.
& Fuel Adjustments: •The PPP for the next 3 months is yet to be finalized and included.

•Based on the analysis, it is suggested that the PPP, including Trans & MO fees, should be around 29.5 Rupees/Unit.
Final Analysis: •This suggested PPP aims to minimize the impacts of QTR and FC adjustments.

•Last Year's PPP simulation with Transmission and MO Charges: 29 Rupees per Unit.
•This Year’s PPP Scenario 4 Considering 10% Demand Reduction: 29.13 Rupees per Unit.
Summary •Average PPP Over Last 9 Months: 31.14 Rupees per Unit.
•Proposed PPP to Minimize QTR and FCA Impacts: 29.5 Rupees per Unit.
•Average Consumer End Tariff considering 3.5 Rupees Distribution Margin results in 33 Rupees per Unit.

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OUR VISION, MISSION & VALUES
Empowering Your Energy Strategy, Together
ARZACHEL
EMPOWERING YOUR ENERGY STRATEGY, TOGETHER.

OUR VISION
To be a leading global consultancy firm, driving change and progress in the
energy sector through innovation and best practices, while fostering a
culture of collaboration and social responsibility.

OUR MISSION
Our mission is to provide innovative and sustainable energy solutions to our clients, while
driving the transition towards a low-carbon future. We are committed to leveraging our
expertise and experience to deliver high-quality consulting services that meet the unique
needs of each client, and to promoting environmental responsibility and social equity in all our
projects. We strive to be a trusted partner for our clients, employees, and communities, and to
contribute to a more resilient and prosperous world.

OUR VALUES
We prioritize sustainable solutions that minimize environmental impact and
promote a low-carbon future.

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 WHAT WE DO
Our team at Arzachel can help transform your project idea into a well-defined project layout, meticulously assessing various realization concepts. We conduct
thorough investigations into the technical feasibility and financial viability of projects, laying the groundwork for potential project funding commitments.

MARKET ANALYSES TARIFF STUDIES

Comprehensive insights and research to Thorough evaluations of pricing structures and strategies
identify market trends and opportunities for to optimize revenue generation and cost management.
informed decision-making.

FEASIBILITY STUDIES TECHNO-ECONOMIC ANALYSES

Rigorous assessments of project viability, Detailed evaluations of the technical and economic
considering technical, economic, and aspects of projects, providing a holistic understanding
logistical aspects to determine potential of their feasibility and profitability
success.

ENVIRONMENTAL AND SOCIAL Studies and INTEGRATED INFRASTRUCTURE

STUDIES CONCEPTS & DESIGNING SERVICES
Evaluations of the potential environmental Expert
Holistic and integrated approaches to designing
and social impacts of projects, ensuring Appraisals infrastructure systems that optimize efficiency
compliance.
and effectiveness.

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THANKS FOR YOUR ATTENTION!
Empowering Your Energy Strategy, Together

Contact us:
Arzachel Pvt. Ltd.
Pakistan: Ground Floor, Building # 57-C, Main 24th Commercial Street,
Phase 2 Extension, DHA, Karachi.

[email protected]

+92-331-6747401