Boston, MA -- (SBWIRE) -- 02/23/2013 -- BMI View: Pakistan will continue to face chronic power shortages for the next year or more, despite aggressive pledges and plans announced by government officials and aid promised by various foreign organisations and diplomats. System inefficiencies prevent plans of the international organisations from being effectively implemented, while the poor fiscal position aggravates the situation as private producers are discouraged from increasing investment given the lack of promptness in payment. Hydro power and renewable energy sources remain as alternatives that states struggle to tap on due to the high capital outlays required.

Permanent resolutions and solutions to the power shortage remain out of sight for Pakistan as load shedding across the country remains on the rise. The shortfall has escalated further as faulty generators, lack of fuel (oil and gas) and low levels of rain compounded the situation. However, with the general elections in Pakistan due in 2013, the government has raised PKR82bn from debt issuance in September 2012 to pay its delayed dues (estimated around PKR400bn or US$4.2bn) to private electricity producers to encourage electricity production. Poor performance from existing generating assets, the lack investment in generating capacity, power thefts and an inefficient grid remain obstacles to the government's aim.

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The key trends and recent developments in the Pakistani electricity market include:

- Iran has begun negotiations with Pakistan in November 2012 on an agreement that would see Iran export 1,000 MW of electricity. Mjid Namjou, Iranian Minister of Energy has further expressed keenness to build another power plant on Iran's border that his country could boost the total amount of energy available for export by another 2,000 MW. Pakistan's neighbour has further pledge to complete the gas pipeline by 2014, a move which could alleviate the fuel shortages faced by certain states.
- The constructions of the various dams have met with increasing environmental concerns and financing issues, which threaten to stall works. For example, the World Bank and other international aid agencies have withdrawn their support for the Diamer-Basha dam project due to environmental concerns raised by India. While it remains to be seen if financing will indeed come through, recent improvements in Pakistan-Iran relations have made other countries such as the US wary, and has spurred a wave of diplomatic meetings with the Pakistani government which could prompt the provision of funds for these infrastructure projects. In particular, the US has agreed to discuss the financing issue of the Diamer-Basha dam in the US-Pakistan Economic Working Group meeting held in December.

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