The Asian Development Bank (ADB) has announced that it will provide a loan of $65 million for a new private-sector hydroelectric power project in Pakistan, which will continue the drive to overcome electricity shortages besides increasing the share of clean energy in fuel mix.
The loan will be provided to Mira Power Limited, a special purpose company controlled by three companies of South Korea, which will build and operate a run-of-the-river hydropower generating facility on Poonch River in Kotli district, around 160 kilometres from Islamabad, according to a handout issued by the ADB’s local office.
The project will be undertaken on a build-own-operate-transfer basis and electricity will be sold to state-owned National Transmission and Despatch Company Limited under a take-or-pay power purchase agreement.
The special purpose company is majority-controlled by Korea South-East Power Company Limited, which is a subsidiary of listed Korea Electric Power Company, with other stakes held by units of Daelim Business Conglomerate and Lotte.
The new plant will have installed power generating capacity of 102 megawatts, equivalent to almost 2% of the current shortfall in the country. By substituting fossil fuel-based electricity, it will help Pakistan avoid greenhouse gas emissions of nearly 254,000 tons of carbon dioxide equivalent a year.
Hydroelectric power is the cheapest source of electricity in terms of per-unit cost compared to other alternatives.
Social and environmental concerns about the project have been addressed through a number of measures including the construction of a weir to prevent flooding and the development of a fisheries and wildlife conservation plan, which will help protect endangered species. Cash compensation and livelihood support will be provided to the households affected by the project.
Severe power shortages remain a major strain on Pakistan’s economy and scaling up hydropower usage is essential for meeting demand and reducing reliance on costly imported fossil fuels for electricity production, said Mohammed Azim Hashimi, Investment Specialist in the ADB’s Private Sector Operations Department.
This project also supports Pakistan’s policy of tapping the private sector for power industry investment.
The ADB has been a pioneer in the development of private sector clean power projects in Pakistan, financing the first two hydropower and first three wind power projects. The ADB funding for long-term debt has helped meet the gap in the market for infrastructure finance, according to the handout.
Other project loan assistance will be provided by Export-Import Bank of Korea, the International Finance Corporation and its parallel co-financiers, along with equity from the special purpose company’s shareholders for a total investment cost of over $367 million. The project will continue for over 55 months, with completion expected in March 2019.
Published in The Express Tribune, May 19th, 2015.