"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, adding 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 relied heavily on imported fossil fuels for the bulk of its energy needs, said ADB statement received here on Friday, adding however, it was costly, and put a heavy burden on Pakistan’s foreign exchange reserves, and left the country vulnerable to supply disruptions and global price fluctuations. Investment in new capacity has lagged, whereas demand has surged by over 40 percent over the past five years, resulting in regular brownouts in all major urban centres and the introduction of power rationing.
The Government of Pakistan was 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 were available in the south of the country alone, the statement added.
"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, the statement said adding it is 68 percent owned by Zorlu Holding AS, one of the largest conglomerates in Turkey.
The existing 6 megawatts 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 megawatts 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 realise the government’s target of six percent 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 Shah.
The total cost of the project is 147 million dollars with 30 percent 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.