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ADB to finance hydropower project

Staff Report

ISLAMABAD: The Asian Development Bank (ADB) will help bridge electricity shortfall and encourage the development of hydropower resources in Pakistan through a new $37.3 million loan.

According to an announcement made at Manila, the loan will help finance an approximately 80-megawatt power plant located downstream of Mangla Dam on the Jhelum River in Azad Jammu and Kashmir.

This is the ADB’s first proposed assistance to a private sector hydropower project in Pakistan and the first such project to be developed in the region.

The New Bong Escape Project, so called because of its position on the escape channel from the existing Mangla power station, will be a “run-of-the-river’” scheme involving no new dam or reservoir and will thus have minimal environmental and social impacts (see summary initial impact examination posted on September 9, 2005). The electric power generated by the project will feed into the national grid.

The project company, Laraib Energy Limited, is owned by a subsidiary of Ranhill Berhad, a Malaysian engineering and utility asset-owning company listed on the Kuala Lumpur Stock Exchange and by various local and international business interests.

The project is expected to begin construction soon and is scheduled to begin commercial generation of electricity by the beginning of 2009. AJK was badly affected by the October 8 earthquake.

“The project is far from the epicenter of the earthquake and was not directly affected should bring job opportunities and will help upgrade infrastructure in the area,” says Michael Barrow, an ADB Principal Structured Finance Specialist. Together with the ADB loan and the sponsor equity, the project is expected to be financed with loan facilities from the Islamic Development Bank (IDB) and Pakistani commercial banks. The IDB facility will be Shariah-compliant.

“This project represents a number of important firsts for the ADB and for the region,” says Mr Barrow. “It will be the first private-sector hydropower project in Pakistan which should lead the way for many similar schemes.

It will be the first large-scale, private sector infrastructure project in Azad Jammu and Kashmir. And it will also be the first private sector cofinancing between the ADB and the IDB.”

The ADB loan is without government guarantee and comes from the bank’s ordinary capital resources.

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