Privatising the Pakistani Power Sector

This case is set in 2010. It is a retrospective case that examines a 1994 policy reform and incentive framework meant to attract private sector investment for power generation in Pakistan. Inadequate power generation and distribution were long-standing development hurdles for the country – and international donors, such as the World Bank, had successfully petitioned the government of Pakistan to privatise their power sector. Privatisation, it was believed, would incentivise the necessary infrastructure investment to overcome the sector’s historic challenges.

Electrical power generation and distribution in Pakistan was originally provided by private regional utilities. These utilities were then later nationalised under the Water and Power Development Authority (WAPDA) in 1972. Despite this, there were persistent challenges related to the fuel mix and associated energy import costs, limited power generation capacity, and transmission and distribution losses.

For WAPDA to be privatised, it would have to first be corporatised and restructured into distinct profit centres with independent management and separate accounts that established a commercial track record. At the same time, investors would be incentivised to fund independent power producers (IPPs) through purchase power agreements (PPA) with the WAPDA in order to finance new capacity. However, there were numerous conflicts of interest between stakeholders themselves. Contemporary public-private partnerships can benefit from Pakistan’s 1994 policy reform by understanding what went right, and what went wrong.

This case is targeted to participants who are interested in understanding the challenges associated with dealing with governance issues arising in public-private partnerships. It will pay special attention to complexity theory and themes related to ‘social license to operate’ and risk-sharing., Students will gain a deeper understanding of energy related issues from an economic, political and social context. The case is designed for use in advanced undergraduate, postgraduate and executive education classes.

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