A significant setback is that Muzaffargarh’s 600-megawatt solar power project has failed to attract any bids despite the Private Power & Infrastructure Board’s (PPIB) efforts to revise incentives and extend deadlines. This initiative, marking the first pilot project for acquiring renewable energy through international competitive bidding (ICB), was in alignment with the Indicative Generation Capacity Expansion Plan (IGCEP). Despite multiple rounds of bidding and incentive revisions since late 2022 under the Framework Guidelines for Fast-Track Solar PV Initiatives 2022, no investor submitted a bid by the January 11 deadline.
An official from PPIB confirmed this outcome, indicating no further extensions or corrigenda are being considered. The lack of interest is attributed to political uncertainty, macroeconomic conditions, country credit rating, and risks associated with the power sector, including substantial payables and circular debt.
Government Efforts and Investor Reluctance
Last month, the PPIB extended the bidding deadline, inviting proposals for the 600MW Solar PV project at Kot Addu, Muzaffargarh, on a build, own, operate, and transfer (BOOT) basis for 25 years. Evaluation criteria were based on the lowest tariff and a project completion timeline of approximately 26 months. This project, part of a federal initiative to induce about 10,000MW solar energy, aimed to reduce carbon footprint, foreign exchange exposure, and electricity tariffs. Despite land allocation and facility provisions, the first bidding round ending May 31, 2023, under a benchmark tariff regime, failed to attract bidders, prompting the removal of the benchmark tariff and introducing more favourable terms for investors. However, these adjustments did not result in bid submissions.
Future Considerations and Political Climate
The prevailing political situation and the caretaker government’s advisories to delay bidding until a new government formation are primary reasons for investor disinterest. The decision to not prolong the process indefinitely leaves the matter for a new government to consider a fresh bidding round around April-May. This approach may also open avenues for government-to-government negotiations with friendly countries for solar capacity expansion. As of October 31, 2023, the power sector’s circular debt exceeded Rs2.6 trillion, with substantial amounts due to Chinese investors’ involvement in the China-Pakistan Economic Corridor. The country’s installed capacity stands around 45,000MW, but peak winter capacity utilization often falls below 9,000MW due to high electricity rates.
