The United States has asked Pakistan to securitise assets of different dams including Tarbela and Mangla in order to seek funds from international donors for the multi-billion-dollar Diamer Bhasha Dam.
The suggestion came in a meeting between US embassy officials and Federal Water and Power Minister Ahmed Mukhtar here on Tuesday.
The diplomats assured the minister that the US would play its role in generating funds to meet the entire cost of $13 billion for the 4,500-megawatt Diamer Bhasha dam and power project by becoming part of a consortium, led by the Asian Development Bank (ADB). Earlier, the ADB had refused to lead the consortium.
Pakistani authorities expect to raise $3 billion by securitising assets of Tarbela and Mangla Dam, but the US officials insist that all the cost of Diamer Bhasha project will be covered by implementing the securitisation plan.
Securitisation means creation of an investment instrument by combining financial assets and then marketing different tiers of the repackaged instruments to the investors.
A video conference will be held next month in Washington involving a US energy team and officials of the Water and Power Development Authority (Wapda) to discuss the implementation of the plan of securitising assets of dams.
The government is facing difficulties in generating funds for Diamer Bhasha Dam as the World Bank has sought no-objection certificate (NOC) from India, which says that the planned dam site is situated in a “disputed territory”.
Other donors have offered funds for Dasu hydropower project instead of Diamer Bhasha.
According to a statement issued here, a three-member team of the US embassy, led by Economic Assistance and Development Counsellor Richard Albright, met Water and Power Minister Ahmed Mukhtar and discussed the cooperation in the power sector, management and improvement in power distribution companies and financing for Diamer Bhasha Dam. Adviser on the Dam Shakil Durrani was also present.
Praising US cooperation and assistance, Mukhtar said it would help to improve the efficiency of public sector power utilites. The government, he said, was working on power sector reforms, rehabilitation and upgrading of generation companies, improvement in distribution companies, power theft control and reduction in line losses.
Mukhtar pressed for US assistance as well as from the ADB and other donors for the all-important Diamer Bhasha Dam – termed a lifeline for the country’s economy. He also discussed the chances of US investment in coal and wind power projects.
The counsellor reaffirmed the US commitment, saying it would continue to support the people of Pakistan and help to improve the power sector.
Diamer Bhasha was a very important project for future water requirements and generating cheap power and the US was interested in extending financial assistance, he said.
He discussed various proposals for raising funds for the project and offered financial advice.
Albright recalled that previous meetings on the energy sector between the two countries were very beneficial, in which various programmes were chalked out to assist Pakistan in the power sector through reforms and upgrading and rehabilitation of existing plants.
Published in The Express Tribune, October 24th, 2012.
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@realist: This is good one
i have been saying this for years now! this is the only solution. I am glad some one influential raised this up
how about mortgaging pak politicians wealth as a surety for obtaining finance?
yes go on start selling assets that are left, the cheaper electricity from Tarbela and Mangla will soon be history once the investor put their curbs on it. Its old tactic of US and other players, they ask world bank, ADB and even other countries to stop lending to Pakistan to get the demands met and then have a complex loan rolled out. Hence the novel idea of mortgaging existing dams.
I would go for Russian, China or both for this even if they ask for no bidding for the project. It will still be better than these clutches!
We already paying high price of oil power generation, core cause of loadshedding and mega import bill for Pakistan, also creating huge debt with subcidies! If this goes ahead, the hydal power will also be dearer!
Make them corporations, enact laws to ensure that they have they follow water flow requirements as dictated by IRSA and privatize them? Perhaps bar foreigners from owning them? That should lead to more than enough funds.
Love the word SECURITISE ..
"(Securitisation) Securitization is a structured finance process that distributes risk by aggregating assets in a pool (often by selling assets to a special purpose entity), then issuing new securities backed by the assets and their cash flows. .."
Just a very brief sketch of how this thing can be done:
Govt. create an SPV and transfer all the assets of DB dam into that SPV. Now, to finance the dam, three sources can be utilized
1- Equity Injection: SPV put part of its own equity into DB dam, say 20% of the project 2- Securitization: Do as explained in the article above. The securitization part can be 50-60% of the project 3- Equity offering: rest of the 20-30% can be offered as equity stake to the institutional/individual investors through IPO or through private placement
It will be an ultimate example of Public-Private Partnership.