Investment Opportunities&Risk Assessment For Chinese Power Sector Enterprises In Pakistan

Pakistan has been experiencing the effects of an acute power shortage that reached a critical state during 2011-12&resulted in country wide power outages typically lasting 10-16 hours a day causing the economy billions of rupees damages.Many industries were forced to shut down while some shifted to other countries to cover their losses.Pakistan’s exports declined while imports shot up which resulted in host of issues;circular debt in the power sector and loss of investor confidence.This power crisis presents itself as an opportunity for foreign companies,especially Chinese companies to enter the Pakistani market and invest in the power sector.Pakistan is an important market under the Belt&Road Initiative as China has already invested US$ 62 Billion in various sectors as part of the China Pakistan Economic Corridor.The investment opportunities for Chinese power sector enterprises focuses on resource potential(coal.gas,hydel and renewable energy)mainly because of existing projects that were funded by foreign investors and abundant resource availability.The annual increase in number of consumers,rising demand,investment in Transmission&Distribution projects and investment as an EPC company are also opportunities for foreign investors willing to take various investment routes;Greenfield investments,mergers&acquisitions&strategic partnerships.Many organizations have improved their risk assessment of Pakistan due to the recent successive democratic power shifts as well as improved law and order situation.A macro level PESTLE analysis has identified the various risk factors for foreign investors while several challenges are discussed.In an attempt to improve the situation of the economy and the power sector as quickly as possible,the Government of Pakistan has added several new thermal projects to the national grid.This has placed Pakistan in a difficult situation where on one hand it needs to solve the power crisis and improve its economic condition but sacrifice the environment and face the effects of climate change disasters while on the other hand it must make the difficult decision to switch to renewable energy now and save itself from natural disasters.In order to provide a golden investment opportunity,the potential of solar PV in Pakistan is discussed as Pakistan has high irradiation in most of the country for all year round.The national grid of Pakistan is found to be suitable to allow integration of renewable energy while there are several business models that can be adopted to serve the market.There are some recommendations for the investors so as to mitigate the risks and seek maximum benefit from their investments.