ADB Supports Pakistan's Push to End Energy Crisis with $900 Million Loan

News Release | 9 December 2013

MANILA, PHILIPPINES – The Asian Development Bank (ADB) is providing a $900 million loan for a new supercritical coal power generation unit in Pakistan that will deliver reliable, cost effective electricity  to hundreds of thousands of energy-starved households and businesses.

“Acute power shortages of up to 20 hours a day have crippled economic growth and are contributing to unemployment and social unrest across the country,” said Klaus Gerhaeusser, Director General of ADB’s Central and West Asia Department. “There is an urgent need for more affordable and dependable sources of power and this unit will generate an additional 600 megawatts of electricity for the national energy mix.”

The country’s energy crisis has led to a sharp reduction in investment, badly hurt industry and small businesses, and in 2012 lopped an estimated two percentage points off annual gross domestic product. The rising costs of imported fuel oil―which accounts for over a third of the country’s energy generation―are also putting an increasingly unsustainable burden on national finances.

The coal-fired generation unit, the first in the country to use supercritical boiler technology, will be built at an existing power plant in the town of Jamshoro in Sindh province, about 150 kilometers east of the provincial capital, Karachi. It will employ state of the art emission control equipment resulting in cleaner emissions than the existing heavy fuel oil-fired generators and subcritical boiler technology which is more commonly used.

Pakistan only has 19% of the global average for carbon dioxide emissions per person and has only one coal-fired power plant in operation generating 0.7% of the generation mix.

Recycling ash from the plant will also save about 115,000 tons of carbon dioxide equivalent per year. The electricity generated from the plant will alleviate some of the power shortages and replace generation from small individual oil and diesel generators which is expected to save a further 503,000 tons of carbon dioxide per year. The new plant will generate electricity at a lower cost saving about $535 million per year on its fuel import bill compared with oil fired generation.

The new unit is a part of broader government efforts to decrease electricity tariff. Coal-fired power plants, using cleaner technology, provide an environmentally sound and cost-effective medium-term energy solution at a time when the country’s natural gas reserves are dwindling.

Resolving the energy crisis is a priority for the country and the government is pursuing all options including large hydropower plants, renewable energy, energy efficiency, increasing domestic gas production, and importing electricity and natural gas.

Pakistan has substantial potential for large hydropower which will be developed to meet long-term energy needs because of the longer construction period involved. Small and medium sized hydropower will be developed to meet medium-term needs. The stable base-load power provided by this project will enable the fluctuating power from solar and wind power to be used without disruption to the grid.

ADB’s assistance, which includes $870 million from ordinary capital resources and $30 million from its concessional Asian Development Fund, will be complemented by cofinancing of $150 million from the Islamic Development Bank and counterpart funds of $450 million from the government. The project is expected to be completed by December 2018. ADB’s assistance will also provide 5 years of operation and maintenance support after its completion.