Pakistan : PAK: ZORLU ENERJI POWER PROJECT

Energy / Renewable energy generation - wind

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 and 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 Central Power Purchasing Agency (CPPA), under a 20-year take-or-pay Energy Purchase Agreement (EPA). The Government of Pakistan (GOP), acting through Alternate Energy Development Board (AEDB), guarantees CPPA''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.

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.

No impact on 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.