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Lesson
Cross-indebtedness has been an energy sector issue since the 1980s. Although the ESRP provided the government the means to eliminate crossindebtedness by financing the arrears out of the budget, the respite provided by the ESRP was temporary, and cross-indebtedness became a major issue again shortly thereafter, reaching unprecedented levels of about PRs503 billion by mid-2013.

Project Number: 32146-013
Project Name: Energy Sector Restructuring Program
Report Date:
Lesson
The ESRP comprised three loans. The largest (Loan 1807) was for $300 million and was designed as a three tranche plus incentive tranche program loan. The other two loans were a $50 million Asian Development Fund loan (Loan 1808) and a $5 million TA loan (Loan 1809). The government availed of the first and incentive tranches of Loan 1807 for $150 million as well as the $50 million Asian Development Fund loan when it complied with the first tranche loan conditions.

Project Number: 32146-013
Project Name: Energy Sector Restructuring Program
Report Date:
Lesson
Subsidization of electricity is a drain on budgetary resources and not sustainable in the longer term when an economy is growing and tax revenues are stagnant. Under the ESRP, electricity subsidies were expected to be eliminated with the establishment of NEPRA, and the tariff was expected to reflect and recover the full cost of production. However, the government continues to subsidize electricity, primarily to domestic and agricultural customers.

Project Number: 32146-013
Project Name: Energy Sector Restructuring Program
Report Date:
Lesson
The privatization of KESC demonstrates that private sector ownership in the energy sector has benefits in terms of efficiency gains. System losses are declining significantly, and KESC’s financial performance has improved substantially since privatization, such that it is now self-financing since first turning a profit in 2012. This accomplishment is remarkable considering the environment in which it operates includes a constrained availability of fuel for its thermal power plants and an unfavorable security and law and order situation.

Project Number: 32146-013
Project Name: Energy Sector Restructuring Program
Report Date:
Lesson
WAPDA was unbundled because the organization had degenerated into an unwieldy, overcentralized, and multilayered bureaucracy, dominated by political expediency and experiencing declining efficiency and quality of service. Even though the unbundling was carried out, operational and financial performance of the unbundled entities did not improve significantly.

Project Number: 32146-013
Project Name: Energy Sector Restructuring Program
Report Date:
Lesson
Experienced foreign investors in power generation have access to private sector technical insurance that sovereign entities may not otherwise have. This is important when technical problems arise that cause major shutdown of operations, as was the case of AKL due to a 2004 fire. Private sector insurance enables unforeseen technical problems to be fixed along with compensation to the insured for revenue loss due to the incident. Foreign investors can leverage important insurance that is often difficult for sovereign entities to acquire.

Project Number: 34912-014
Project Name: AES Kelanitissa Power Project in Sri Lanka
Report Date:
Lesson
Close examination and assessment of real capacity is necessary in analyzing economic and financial benefits for private sector power plant projects supported by ADB. Nameplate capacity needs to be considered in the context of a plant’s capacity factor. No power plant runs 100% of the time, and power plants, like that of AKL, that run on auto diesel fuel will need to shut down routinely for scheduled maintenance. Routine maintenance combined with unscheduled shutdowns lower actual net capacity.

Project Number: 34912-014
Project Name: AES Kelanitissa Power Project in Sri Lanka
Report Date:
Lesson
Risk of lost revenues due to delayed commissioning and unplanned shutdown associated with mechanical failures can be mitigated by requiring expert power plant developers sponsored by ADB to provide more oversight and guidance to construction contractors.

Project Number: 34912-014
Project Name: AES Kelanitissa Power Project in Sri Lanka
Report Date:
Lesson
It is prudent for ADB to consider alternative fuels when appraising the cost and benefits of oil-fired generation plants. Alternative fuels consist of renewable energy sources and thermal fuels, including clean coal options. Private sector support to the power sector is optimized with a comparative analysis of real fuel options.

Project Number: 34912-014
Project Name: AES Kelanitissa Power Project in Sri Lanka
Report Date:
Lesson
Regulatory and institutional reforms alone are important, but they will not result in improved performance in the absence of accountability and incentives. The SDP was based on the premise that regulatory and institutional reforms will improve the performance of sector entities. Although the regulatory and institutional reforms were implemented as intended, the sector entities except for MPTransco showed no significant improvement in performance.

Project Number: 29473-013, 29473-023
Project Name: Madhya Pradesh Power Sector Development Program [Loans 1868/1869]
Report Date:
Lesson
Overreliance on the private sector for power generation investments when there are structural issues in the distribution sector that may not result in desired outcomes. Financial viability and cost recovery in the sector are important considerations for private sector investments in power generation in the absence of opportunities to sell electricity outside the state.

Project Number: 29473-013, 29473-023
Project Name: Madhya Pradesh Power Sector Development Program [Loans 1868/1869]
Report Date:
Lesson
Restoring financial viability of the power sector in Madhya Pradesh requires a holistic approach encompassing technical, institutional, and governance measures. The Madhya Pradesh power sector has been suffering from structural problems such as persistently high level of ATC losses, increasing cost of generation and power purchase, and limited scope of tariff increase as industrial tariffs have already reached the cost of captive power generation.

Project Number: 29473-013, 29473-023
Project Name: Madhya Pradesh Power Sector Development Program [Loans 1868/1869]
Report Date: