Pakistan likely to float $500m bonds to fund Dasu project

This will be backed by partial credit guarantee of the World Bank

ISLAMABAD: Pakistan Water and Power Development Authority (Wapda) is expected to raise $500 million by floating bonds in the international capital market backed by partial credit guarantees of the World Bank in a bid to finance the construction of 4,320-megawatt Dasu hydroelectric power project.

“The foreign commercial cost component of around $500 million will be raised either through loan or bond in early 2018 by using partial credit guarantee of the World Bank,” an official said.

This is in addition to the planned borrowing of $350 million for 10 years from the global capital market approved recently by the Economic Coordination Committee (ECC) of the cabinet to fund the Dasu power project.

A partial credit guarantee of $460 million was available for commercial financing, the official said. Of this, $250 million has been earmarked as guarantee for $350-million borrowing.

The Dasu hydroelectric power project, one of the major schemes currently being executed by Wapda, is being partly funded by the World Bank through International Development Assistance (IDA) of $588 million along with credit guarantee of $460 million.

The Executive Committee of National Economic Council (Ecnec) had approved PC-1 of the project at a cost of $4.38 billion.

In a bid to meet the local currency cost component, out of the intended $2.466 billion, a commercial loan of $1.44 billion has been arranged from a consortium of major local banks, led by Habib Bank Limited, without any credit guarantee.

This is by far the largest loan agreement for any public sector enterprise in the history of Pakistan.

The Dasu power project will be implemented in two phases - each of them will bring production capacity of 2,160MW - on the Indus River in Kohistan district of Khyber-Pakhtunkhwa. Stage-I will take five years and cost an estimated $4.2 billion.

Apart from Dasu, Wapda is working on the Kachhi Canal scheme and its first phase will be completed between August and December this year. The canal will irrigate 72,000 acres of land in the backward areas of Balochistan.

Wapda will also make ready 969MW Neelum-Jhelum hydroelectric power project, 1,410MW Tarbela fourth extension power project and 106MW Golen Gol hydroelectric power project in phases from the end of 2017 to mid-2018.

The low-cost hydel electricity to be produced by these projects will not only help tackle energy shortages in the country, but will also contribute significantly to the development of economic and social sectors.

Energy deficit has been one of the major challenges facing the current government. With the onset of summer, the gap between demand and supply of electricity has widened rapidly, leading to prolonged outages across the country.

The government has pledged that it will be able to do away with the outages with the completion of many ongoing projects by the middle of next year.

For the Dasu project, Wapda has penned two contracts namely Main Works (MW)-01 worth Rs115 billion and MW-02 costing Rs64.4 billion with China Gezhouba Group Company.

MW-01, which will be completed in about five years, includes construction of the main dam, appurtenant structures and hydraulic steel structures whereas MW-02 comprises construction of an underground power complex, tunnels and hydraulic structures.

Published in The Express Tribune, May 11^th, 2017.

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