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Pakistan's critical power shortage will be eased with the help of a $5.3 million equity investment and two loans totalling $97 million, approved today by the Asian Development Bank.
The loans and equity investment will go to Fauji Kabirwala Company Limited (FKPC) for the Fauji Kabirwala Power Project. The Project entails the construction and operation of a 151.0-MW (net), low British thermal unit (Btu) gas-fired, combined cycle power plant near Kabirwala in the Punjab Province. FKPC will build, own and operate its power plant for 30 years.
The Bank's equity investment of $5.3 million from its ordinary capital resources (OCR) will constitute 12.5 per cent of FKPC's paid-up capital. The Bank will provide a loan of $32 million, without Government guarantee, from its OCR with a term of 14 years, including a grace period of three years. A complementary loan of up to $65 million, under the Bank's complementary financing scheme, has also been approved, with an amortization of 12 years, including a grace period of two years. The complementary loan will be arranged by ABN AMRO Bank N.V. with participations by other international commercial banks. Export Development Corporation of Canada will also provide a loan of up to $35 million to help finance the Project.
The Project will utilize indigenous low Btu gas with no alternative economic use other than power generation. As such, it will reduce Pakistan's overall dependence on imported energy. It will also provide much needed additional electricity generating capacity, while having low impact on the environment.
The Bank's loans and equity investment will help Pakistan promote private sector participation in an area that has until recently been reserved for the public sector. Bank assistance will encourage foreign and local investors to make long-term investments in the country's power sector and will have a positive impact on promoting private sector participation in power generation and other infrastructure projects.
Sponsors of the Project are the Fauji Foundation of Pakistan and National Fuel Gas Company, a US gas procurement and distribution company.