Manila, Philippines – The Asian Development Bank (ADB) will be providing a loan to help fund the first privately owned and financed wind farm in Pakistan. The output from the plant will provide much-needed additional power for Pakistan, improve the country’s energy security, and lower reliance on fossil fuels.
Zorlu Enerji Electrik Uretim will use the $ 36.8 million loan to install wind turbines to increase the output of its wind farm – located in the southern Sindh province, 100 kilometers northeast of Pakistan’s commercial hub of Karachi – from the current 6 megawatts to a total 56.4 megawatts.
“Acute energy shortages, caused by low investment, are cutting into Pakistan’s economic growth,” said Michael Barrow, Director in ADB’s Private Sector Operations Department. “This deal should provide a bankable template for future privately funded wind projects, and send a signal that Pakistan’s wind sector is attractive for private sector investment and financing.”
Pakistan relies heavily on imported fossil fuels for the bulk of its energy needs. However, this is costly, puts a heavy burden on Pakistan’s foreign exchange reserves, and leaves the country vulnerable to supply disruptions and global price fluctuations. Investment in new capacity has lagged, whereas demand has surged by over 40% over the past five years, resulting in regular brownouts in all major urban centers and the introduction of power rationing. This has forced shops and industries to close early, undermining Pakistan’s economy. The Government of Pakistan is now engaged in a major drive to expand its energy sources, including tapping renewable energy resources such as wind, given around 50,000 megawatts of capacity are available in the south of the country alone.
“We estimate that three to five projects will come on line following ADB’s support for Zorlu Enerji’s wind farm,” said Siddhartha Shah, Senior Investment Specialist in ADB’s Private Sector Operations Department.
Zorlu Enerji, listed on the Istanbul Stock Exchange, owns and operates Turkey’s largest wind farm. It is 68% owned by Zorlu Holding AS, one of the largest conglomerates in Turkey.
The existing 6 megawatt wind farm project is currently dispatching power to the Hyderabad Electric Supply Company. Once the second construction phase is complete – expected in 2012 – the 56.4 megawatt wind farm will supply power to the national grid through a 20-year take-or-pay power purchase agreement with the National Transmission and Dispatch Company. The approved tariff will ensure that the electricity is priced competitively, with the rate dropping over time as project debt is paid down.
“The project will have multiple benefits including helping realize the government’s target of 6% renewable energy in the total power mix by 2030, and contributing to employment opportunities and economic growth in one of the poorest regions of the country,” said Mr. Shah.
The total cost of the project is $ 147 million with 30% financed through equity provided by Zorlu Enerji and the rest through US dollar-denominated loans from ADB, the International Finance Corp., the ECO Trade and Development Bank and a Pakistan rupee loan from Habib Bank. ADB’s loan will carry a tenor of 12 years with a two-year grace period.
ADB has taken the lead in supporting the Pakistan Government’s efforts to attract private sector capital into the power sector. Initiatives include financing the country’s first private sector run-of-river hydropower project – the New Bong Escape Power Project in 2009, as well as financing three combined cycle power plants using domestic gas – Fauji Kabirwala Power Company Limited, Foundation Power Company Daharki Limited, and Uch-II Power Private Limited.
About ADB
Asian Development Bank (ADB), based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region.
Source: Asian Development Bank Press Release dated February 3, 2011.
