ADB to finance wind energy in Pakistan

Pakistan has potential to develop wind power. The wind corridor in the coastal area of Sindh has the capacity to generate 50000 MW electricity. The Asian Development Bank will provide a loan to fund the first privately owned and financed wind farm in Pakistan. The wind power plant will provide the much-needed additional power for the country, improve energy security and low reliance on fossil fuels.

Zorlu Enerji Electrik Uretim will use the $36.8 million loan from ADB to install wind turbines to increase the output of its wind farm located 100 kilometers northeast of Karachi, from 6 megawatts to a total 56.4 megawatts, an ADB report revealed.

“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 energy projects, and send a signal that Pakistan’s wind power sector is attractive for private sector investment and financing.”, he remarked.

Pakistan relies heavily on imported fossil fuels for the bulk of its energy needs. However, this is costly, puts a heavy burden on its foreign exchange reserves, and leaves the it vulnerable to supply disruptions and global price fluctuations, the report added.

The report said,” investment in new capacity has lagged, whereas demand has surged by over 40% over 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.”

Government of Pakistan is now engaged in a major drive to expand its energy sources, including tapping renewable energy resources such as wind energy, given around 50,000 megawatts of capacity are available in the south of the country alone, it added.

“We estimate that three to five wind farm projects will come on line following ADB’s support for Zorlu Enerji’s wind farm,” said Siddhartha Shah. . 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 overtime 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-year with a two-year grace period. The 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- 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.