Energy-short Pakistan moves to power up solar manufacturing

Updated 29 January 2019
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Energy-short Pakistan moves to power up solar manufacturing

  • A new government budget bill seeks to give renewable energy manufacturers and assemblers in the country a five-year exemption from the taxes
  • Only about 5 to 6 percent of the power to Pakistan’s national electrical grid currently comes from renewable energy

ISLAMABAD: Pakistan’s government has proposed to eliminate taxes associated with manufacturing of solar and wind energy equipment in the country, in an effort to boost the production and use of renewable power and overcome power shortages.
A new government budget bill, expected to be approved in parliament within a month, would give renewable energy manufacturers and assemblers in the country a five-year exemption from the taxes.
“Pakistan is paying the heavy cost of an ongoing energy crisis prevailing for the last many years,” Finance Minister Asad Umar said last week in a budget speech.
“In this difficult time, the promotion of renewable energy resources like wind and solar has become indispensable.”
Only about 5 to 6 percent of the power to Pakistan’s national electrical grid currently comes from renewable energy, according to the country’s Alternate Energy Development Board (AEDB).
The proposed tax reduction should boost that by encouraging greater local manufacturing of equipment needed for renewable power expansion, said Asad Mahmood, a renewable energy expert with the National Energy Efficiency and Conservation Authority, which sits within the Ministry of Energy.

Remaining hurdles
But manufacturers said the tax breaks likely would not be sufficient to spur expansion of local renewable energy industries.
Naeem Siddiqui, the chairman of Ebox Systems, which assembles solar panels in Islamabad, said the new tax breaks were good news but Pakistani manufacturers would still struggle compete with tax-free, low-priced imports of foreign-built solar panels and other renewable energy equipment.
“The government has already waived off taxes and duties on the import of renewable energy products, and local manufacturers cannot compete with the low-priced imported items,” he said.
Pakistan today imports more than 95 percent of the solar panels and other renewable energy systems it uses, largely from China, said Aamir Hussain, chief executive officer of Tesla PV, one of the largest manufacturers of solar energy products in Pakistan.
“As long as the government will not impose duties on the import of finished products, the local market cannot grow,” he said.
Pakistani manufacturers also might need government help in pushing sales of new Pakistani clean energy products abroad, in order to build bigger markets and lower manufacturing costs, Siddiqui said.
Mahmood, of the energy ministry, said he believed the government would also move to cut existing duties on the import of components used in manufacturing finished renewable energy products, in order to help Pakistani manufacturers.
Taxes on those components have pushed up prices of Pakistani-made renewable energy systems, making them harder to sell and leading several companies to the brink of failure, he said.
Local manufacturers should work with the government to determine which components should be manufactured locally and which imported to ensure costs of locally made wind and solar systems are competitive, he said.
Muhammad Abdur Rahman, managing director of Innosol, a company that imports and installs renewable energy systems, said that cheap imports of renewable energy systems from China remain the main barrier to building more such systems in Pakistan.
“The local industry is facing pricing issues because of low-quality solar energy appliances being imported in the country that are very cheap as compared to the local market,” he said.
That might be resolved in part by the government starting a certification system for renewable energy products to grade them according to quality, he said.
Amjad Ali Awan, chief executive officer of the Alternate Energy Development Board, said the aim of the new policies was for renewable energy to supply 28 to 30 percent of the country’s national electrical grid by 2030.


Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

Updated 40 min 19 sec ago
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Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

  • The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios
  • SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year

RIYADH: Saudi Real Estate Refinance Co. (SRC), modelled on US mortgage finance firm Fannie Mae, aims to issue up to 4 billion riyals ($1.07 billion) of long-term sukuk this year, its chief executive said on Tuesday.

The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market.

SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview.

“Our strategy is clearly to tap the market twice this year,” he said. “We are really looking at probably issuing something between ... 2 and 4 billion riyal that we may be issuing in two tranches.

He said SRC was looking at sukuk in the 10 to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said.

He said the company was assessing whether it could also issue bonds in currencies other than the local riyal.

In March, SRC completed a 750 million riyal sukuk issue with multiple tenors, under a program that allows it to issue up to 11 billion riyals of local currency denominated Islamic bonds.

“The rule of the game for us is, like many projects across the Kingdom, attract liquidity from foreign investors,” Susini said.

He said SRC had spent 1.2 billion riyals from its balance sheet buying mortgages from local mortgage financing companies and provided liquidity to these firms.

It has also signed initial accords with several commercial banks to acquire housing mortgage portfolios.

Saudi Arabia’s housing ministry is targeting the mortgage market to reach a total value of 502 billion riyals by 2020 from around 300 billion riyals now.

The government wants to increase activity in the real estate market as it moves to revitalize the economy and is taking steps to reform the sector as part of its 2030 reform plan.

It has been working with developers and local banks to counter a shortage of affordable housing — one of the country’s biggest social and economic problems. Saudi Arabia wants 60 percent of its nationals to own homes by 2020, up from 47 percent in 2016.

The size of real estate financing relative to its gross domestic product is 5 percent in Saudi Arabia compared to 69 percent in the United States, 74 percent in the United Kingdom and 43 pct in Canada, the housing ministry has said.

“The goal of SRC in this market was to make sure that we will be able to refinance at least around 10 percent of the market in 2020, and 20 percent of the market by 2028,” Susini told Reuters.