The Asian Development Bank (ADB) has announced that it is providing a loan of $36.8 million to help fund the first privately owned wind farm in Pakistan.
In an announcement on its website on Thursday, ADB said Zorlu Enerji Electrik Uretim will use the loan to install more wind turbines at the farm, raising power production from six megawatts to 56.4MW.
The extra output from the farm, located in Sindh, will provide much-needed electricity for the economy, improve energy security and lower reliance on fossil fuels.
“Acute energy shortages, caused by low investment, are cutting into Pakistan’s economic growth,” said Michael Barrow, Director in ADB’s Private Sector Operations Department. “This deal should provide a bankable template for future privately funded wind projects and send a signal that the wind sector is attractive for private sector investment and financing.”
Pakistan relies heavily on imported fossil fuels for the bulk of its energy needs, however, this is costly, puts a heavy burden on foreign exchange reserves and leaves the country vulnerable to supply disruptions and global price fluctuations.
Investment in new capacity has lagged demand which has surged by over 40% over the past five years, resulting in regular brownouts in all major urban centres and introduction of power rationing.
The government is now undertaking a major drive to expand energy sources, including tapping renewable energy resources such as wind. There is around 50,000MW of wind power capacity available in the south of the country alone.
Zorlu Enerji, listed on the Istanbul Stock Exchange, owns and operates Turkey’s largest wind farm and is 68% owned by Zorlu Holding AS, one of the largest conglomerates in Turkey.
“We estimate that five to seven projects will come online following ADB’s support for Zorlu Enerji’s wind farm,” said Siddhartha Shah, Senior Investment Specialist in ADB’s Private Sector Operations Department.
Existing power generated by the wind farm is currently being dispatched to the Hyderabad Electric Supply Company. Once the second construction phase is completed, expected in 2013, the farm will supply power to the national grid through a 20-year take-or-pay power purchase agreement with the National Transmission and Dispatch Company. The tariff will be set at a competitive level with the rate dropping over time as project debt is paid.
Total cost of the project is $147 million with 30% financing through equity provided by Zorlu Enerji and the rest through US dollar-denominated loans from ADB, the International Finance Corporation and ECO Trade and Development Bank, as well as a Pakistan rupee loan from Habib Bank. ADB’s loan will carry a tenor of 12 years with a two-year grace period.
Published in The Express Tribune, October 28th, 2011.