Water shortages add to Pakistan power utility costs

KARACHI, May 30 (Reuters) Falling reservoir water levels are compounding the financial woes of Pakistan's main utility, which has been forced to use larger amounts of oil to generate subsidised electricity, officials today said.

Fuel oil demand had soared 56.3 per cent during the past four months after water shortages cut hydroelectric output, said a senior official of the state-owned Water and Power Development Authority (WAPDA), the country's biggest utility.

''Furnace oil consumption has increased considerably from January onwards when hydel output dropped,'' Anwar Khalid, an official in charge of power generation at the WAPDA, told Reuters.

Water levels in major reservoirs are critically low after Pakistan got 40 per cent less than normal winter rain and up to 25 per cent less snowfall.

WAPDA, which has a mix of hydroelectric and fuel-fired power plants, consumed 712,594 tonnes of furnace oil during January to April, against 455,716 tonnes in the same period last year.

The utility also buys 6,108 magawatts of electricity from independent power producers (IPP), but under its contracts, higher fuel prices are absorbed by WAPDA, the only buyer of their output.

Khalid said private plants pay only 3,000 rupees a tonne for furnace oil under a 1999 agreement.

''Fuel oil is presently at 26,000 rupees per tonne, so one can imagine the quantum of hit we are taking,'' he said.

Pakistan annually imports almost 5.6 million tonnes of fuel oil to help meet demand of 8.5 million tonnes.

Khalid said the utility, which generates 11,242 MWs, would maintain maximum output through fuel-oil and gas-fired methods despite the water shortages.

''We are calculating the hit we are facing because of fuel oil prices... we know it is beyond the authority's financial capacity,'' he said, declining to reveal the higher fuel costs WAPDA had to bear in recent months.

Fuel oil prices in Pakistan have gone up 17.8 per cent in the past five months to 26,628 rupees a tonne, as prices on the benchmark Singapore market jumped by about 20 per cent.

Asif Qureshi, head of research at Invisor Securities said WAPDA had to bear at least an additional 9.5 billion rupees due to the higher fuel oil consumption between January and April.

''In addition the hit due to the IPPs was around 4 billion rupees according to our calculation,'' Qureshi said.

WAPDA's installed capacity is 35 percent hydropower, 49 per cent gas-fired, 12.5 per cent fuel oil, 3.1 per cent nuclear and 0.2 per cent is coal-fired.

It has not disclosed how much the share of hydroelectricity has fallen and fuel oil increased in recent months.

HIGHER PRICES? Another senior WAPDA official said the utility had asked the government to raise power prices, last raised in September 2003.

Latest figures are not available but over the past six years, the government's financial help to WAPDA, which has 15.8 million consumers, amounted to 121.795 billion rupees.

WAPDA also has transmission and line losses, caused by poor infrastructure, and electricity theft amounting to 21 per cent of output, down from more than 30 per cent three years ago.

The utility booked losses of about 41 billion rupees last year by subsidising power to consumers under a government policy.

''We have asked the government to allow a much-needed tariff increase and a proposal has been pending with them for six months,'' the second official said.

''They have not even entertained our request and chances are the government will delay any increase until after elections next year.'' Any power tariff change has to be approved by the government's National Electric Power Regulatory Authority.

WAPDA is not listed on the Karachi Stock Exchange <.kse> but the government plans to privatise the entire electricity distribution network. No date has been set.

REUTERS SY VV1508