Multiple schemes ready to attract Saudi investment

Govt to pitch Diamer-Basha dam for $1.2 billion equity-partnership

ISLAMABAD:

Pakistan has decided to pitch the Diamer-Basha dam project for equity partnership with Saudi Arabia in return for $1.2 billion in investment along with a host of other schemes, as both nations are set to begin discussions for finalising the $5 billion investment package.

The Saudi authorities would be given two options for investing in the Diamer-Basha project. The first option will be the investment of $1.2 billion for a fixed period in return of fixed returns, according to officials involved in these discussions.

According to the second option, Saudi Arabia can become a partner in the project, and in this case, it will be requested to also arrange another $2.3 billion debt for the financial closure of the scheme.
The Diamer-Basha dam project is being constructed on a 30% equity and 70% debt ratio.

The Saudis will be offered to become partners in the equity and by that they are being requested to also raise the debt. The country has already begun work on the dam part of the project.
Diamer Basha Dam will have the capacity to generate around 18 billion units annually.

It will generate 4,500 megawatts of electricity with storage capacity of 6.4 million acres feet of water.
But the multibillion dollars project faces a financing gap of $3.5 billion and in case Saudi Arabia decides to take the second option, the project would achieve the financial close and can be completed by December 2029, according to the government sources.

The project will be part of about one and half dozen schemes that Pakistan would offer to Saudi Arabia on Tuesday (today) for deciding to invest $5 billion in Pakistan in the medium term, according to the government officials.

A Saudi delegation, led by Foreign Minister Prince Faisal bin Farhan Al Saud, was in Pakistan on Monday for a two-day visit. The delegation comprises Minister of Water and Agriculture Abdul Rahman Abdul Mohsen Al-Fadley, Industry and Mineral Resources Minister Bandar Ibrahim Al Khorayef, Deputy Minister of Investment Badr Al Badr, head of Saudi Special Committee Mohammad Mazyed Al Towaijri and senior officials from the Energy Ministry and the Saudi Fund for General Investments.

The visit is expected to expedite action on the understanding reached between Prime Minister Shehbaz Sharif and Saudi Crown Prince and Prime Minister Mohammed bin Salman, during their recent meeting aimed at enhancing bilateral economic cooperation.

The two leaders had agreed to expedite the first wave of a planned $5 billion Saudi investment package for Pakistan. The Saudi delegation will meet with the president, the prime minister and the foreign minister.

Pakistani authorities said that no final agreement was expected to be signed during the visit, which primarily aimed at finalising the projects that Saudi Arabia could pick for making the $5 billion investment.

They added that there were about half a dozen projects that were ready for the Saudi Investment, including the Diamer Basha dam and a 600MW solar power plant.

The other projects that can immediately be picked for the investment include iron ore scheme in Chiniot, construction of railways network to connect Reko Diq project with the port, two integrated tourism projects in Khyber-Pakhtunkhwa and some mining schemes.

Pakistan also has a desire to bring in Saudi investment in the oil refinery project but the kingdom was not inclined in this Greenfield project. The sources said that the Pak-Arab Refinery Company (Parco) also had some issues with the scheme. But there is still a possibility for Saudi investment in the Pakistan refinery project, they added.

Pakistan has been struggling to raise money from international institutions amid Indian opposition to the project. Pakistan had also offered the Diamer Basha project to China under the China-Pakistan Economic Corridor (CPEC) framework but the deal could not be finalised.

Ground-breaking of the Diamer-Basha dam has been performed many times in the past 20 years. Neither the World Bank and the Asian Development Bank (ADB) nor China would finance the dam, therefore, the government decided to construct the reservoir from its resources.

Multilateral donors had refused to give financing for this project due to lobbying by India that the project falls in a disputed area.

The Pakistani authorities are pinning high hopes on the large Saudi delegation visit. This visit is also crucial to bring the first investment under the Special Investment Facilitation Council (SIFC) shortly.

For the Pakistani authorities, the milestone visit is the climax of the many visits done by both sides to complete the groundwork.

During the visit, concrete projects will be discussed and finalised under the SIFC ambit, according to the SIFC Secretariat. This visit will be followed by another visit of the Assistant Defence Minister of Saudi Arabia and a high-powered delegation that will arrive on Tuesday to finalise the projects related to defence production and defence cooperation.