Pakistan: PAK: ZORLU ENERJI POWER PROJECT

Nonsovereign Project | 43937-014

Summary

ADB has provided $33.92 million loan to Zorlu Enerji Pakistan Limited (ZEPL), a wholly owned subsidiary of Zorlu Enerji Elektrik retim (the sponsor), to build a landmark wind power project in Sindh Province that will increase the country's renewable energy generation capacity. The project, a 56.4 MW wind power plant, was developed in two phases. Phase 1 (6 MW) was constructed through equity financing in 2009 and Phase 2 (50.4 MW) was constructed with a combination of equity and debt by ADB and other lenders. The power offtaker is National Transmission and Despatch Company (NTDC), under a 20-year take-or-pay Energy Purchase Agreement (EPA). The Government of Pakistan (GOP), acting through Alternate Energy Development Board (AEDB), guarantees NTDC's obligations under the Implementation Agreement (IA) and bears the wind availability risk. The final project cost slightly increased from $147 million to $152.9 million (primarily on account of USD/Euro fluctuation and IDC).

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Project Name PAK: ZORLU ENERJI POWER PROJECT
Project Number 43937-014
Borrower/Company ZORLU ENERJI PAKISTAN LIMITED
Country Pakistan
Location Jhimpir town, District Thatta, Southern Sindh, Pakistan
Approval Number 7319/2704
Type or Modality of Assistance
7319/2704 Loan USD 36.80 million Committed
Strategic Agendas
Drivers of Change
Sector / Subsector Energy - Renewable energy generation - wind
Gender Equity and Mainstreaming
Responsible ADB Department Private Sector Operations Department
Responsible ADB Division Portfolio Management Division, PSOD
Responsible ADB Officer Jose Manuel Limjap
Project Sponsor(s) Zorlu Electrik Enerji Uretim
Description ADB has provided $33.92 million loan to Zorlu Enerji Pakistan Limited (ZEPL), a wholly owned subsidiary of Zorlu Enerji Elektrik retim (the sponsor), to build a landmark wind power project in Sindh Province that will increase the country's renewable energy generation capacity. The project, a 56.4 MW wind power plant, was developed in two phases. Phase 1 (6 MW) was constructed through equity financing in 2009 and Phase 2 (50.4 MW) was constructed with a combination of equity and debt by ADB and other lenders. The power offtaker is National Transmission and Despatch Company (NTDC), under a 20-year take-or-pay Energy Purchase Agreement (EPA). The Government of Pakistan (GOP), acting through Alternate Energy Development Board (AEDB), guarantees NTDC's obligations under the Implementation Agreement (IA) and bears the wind availability risk. The final project cost slightly increased from $147 million to $152.9 million (primarily on account of USD/Euro fluctuation and IDC). Other financiers included IFC, Eco Trade and Development Bank, and Habib Bank Limited. The Project is the first privately financed wind power project constructed under the Renewable Energy Policy 2006 in Pakistan.
Objectives and Scope

The transaction merits ADB's assistance for the following reasons:

(i) It will increase incremental supply of energy to reduce a growing energy deficit which is seriously constraining economic growth. It also increases access to energy for households, business and industry;

(ii) Makes efficient use of an energy resource which is domestic and renewable, this reduces the reliance on expensive oil imports;

(iii) Reduces emissions of pollutants and greenhouse gases;

(iv) Sets the precedent and provides a template for future wind projects in Pakistan;

(v) Support's ADB's public sector efforts in promoting renewable energy in Pakistan; and

(vi) Increases economic growth and supports infrastructure development in one of Pakistan's poorest and most under-developed regions

(vii) The project is fully consistent with ADB's Energy Policy 2009, under which support to renewable energy generation has been identified as a key priority.

Linkage to Country/Regional Strategy The project is consistent with ADB's long-term strategic framework (Strategy 2020) which emphasizes ADB's support for environmentally sustainable infrastructure projects and private sector development. ADB's support for the Project is in line with Pakistan's 2009 13 Country Partnership Strategy (CPS) and GoP's strategic emphasis on energy sector development. The Project will also help ADB to meet its commitment under the Energy Policy to undertake clean energy investments of $2 billion per year from 2013 ($1 billion per annum until then).
Status of Development Objectives Development objectives as stated in the objectives have been broadly met; more wind power capacity has come online since ADB provided financing for this project (106.4 MW by end of December 2013); more (almost 150 MW) is expected by December 2014. Financial close has also been achieved for 5 projects (total capacity of 250 MW); most of these projects will come on line before year end 2015.
Material Changes None
Safeguard Categories
Environment B
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects Short-term impacts including soil erosion and contamination, air quality deterioration, noise, and safety hazards were anticipated mostly during the construction period. Impacts during wind farm operation include aesthetics impacts and bird mortality. Considerations to minimize the net impact of the project development works have been incorporated throughout the life cycle of the project from design, commissioning, and operations.
Involuntary Resettlement No people or groups in the project area were affected by the project construction and operation.
Indigenous Peoples

Since basic amenities are not available in the area, most of the local population resides in nearby villages (more than 3 km from the project site) where better educational, health, and commercial facilities are available. The land identified as the project site does not belong to any tribal group nor is it being claimed as ancestral domain. People residing in the nearby villages graze their cattle in the project area during summer when there is enough rain to allow for grazing of their animals. Since the boundary of the project area was not fenced, the local population continued to use the area as grazing ground for cattle.

The project offered some employment opportunities for local villagers, primarily during the construction phase. It had a relatively short construction period, and required some skilled and semi-skilled workers, including crane and heavy equipment operators, engineers, electricians, electronic technicians, mechanical technicians, concrete workers, and laborers. The balance-of-plant contractor accommodated as much local labor as possible from the local area.

Stakeholder Communication, Participation, and Consultation ZEPL designed an environmental management plan with organizational structure, roles and responsibilities, mitigation plan, monitoring plan, change management plan, communication and documentation, and environmental training defined to ensure that all the mitigation measures and guidelines recommended for the project in the initial environmental examination were adhered to. An audit of the existing 6 MW was carried out in accordance with ADB's Safeguard Policy Statement (2009). Public consultations were made in and around the project area to ascertain opinions concerning wind farm in the area; attitudes to specific aspects of wind energy, including visual, environmental, social, and economic dimensions; and acceptance of wind farms at the local level. The overall results of the public consultations are encouraging, with stakeholders generally very positive toward the development of the wind farm in the area.
Timetable for assistance design, processing and implementation
Concept Clearance 26 Aug 2009
Due Diligence
Credit Committee Meeting 18 Oct 2010
Approval 24 Nov 2010
PDS Creation Date 23 Sep 2010
Last PDS Update 23 Sep 2014
Title Document Type Document Date
Zorlu Enerji Power Project Reports and Recommendations of the President Nov 2010
Zorlu Enerji Power Initial Poverty and Social Analysis Aug 2010

Safeguard Documents

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Title Document Type Document Date
Zorlu Enerji Power Project: Environmental and Social Development Annual Monitoring Report (FY2012) Environmental and Social Monitoring Reports May 2013
Zorlu Enerji Power Project Initial Environmental Examination Apr 2010

Evaluation Documents

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