Asian Development Bank (ADB) has provided a loan of $36.8 million to Pakistan’s first privately owned wind farm by a Turkish company, Zorlu Enerji Electrik Uretim that is utilising it to raise the power output from the current 6 megawatts (MW) to 56.4 MW.
A statement issued by ADB said the total cost of the project is $147 million, out of which 30 per cent is financed through equity provided by Zorlu Enerji and the rest through US dollar-denominated loans from ADB, the International Finance Corp, and ECO Trade and Development Bank, as well as a Pak Rupee loan from Habib Bank. ADB’s loan will carry a tenor of 12 years with a 2-year grace period.
Existing power generated by the wind farm is currently being dispatched to the Hyderabad Electric Supply Company. Once the second construction phase is complete – expected in 2013 – the 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. Tariff will be set at a competitive level with the rate dropping over time as project debt is paid down.
Director in ADB’s Private Sector Operations Department Michael Barrow said in a statement, “Acute energy shortages, caused by low investment, are cutting into Pakistan’s economic growth. 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 its foreign exchange reserves, and leaves the country vulnerable to supply disruptions and global price fluctuations. Investment in new capacity has lagged demand which has surged by over 40 per cent 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 extra output will provide much-needed electricity for the economy; improve energy security, and lower reliance on fossil fuels.
Senior Investment Specialist in ADB’s Private Sector Operations Department Siddhartha Shah said, “We estimate that five to seven projects will come on line following ADB’s support for Zorlu Enerji’s wind farm. The project will have multiple benefits including helping realise the government’s target of 6 per cent renewable energy in the total power mix by 2030, while contributing to employment opportunities and economic growth in one of the poorest regions of the country.”
The government is undertaking a major drive to expand its energy sources, including tapping renewable energy resources such as wind. There is around 50,000 MW of wind power capacity available in the south of the country alone. Zorlu Enerji, listed on the Istanbul Stock Exchange, owns and operates Turkey’s largest wind farm and is 68 per cent owned by Zorlu Holding AS, one of the largest conglomerates in Turkey. ADB has taken the lead in supporting the Government of Pakistan’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 Project in 2009, and the funding of three combined cycle power plants using domestic gas ― Fauji Kabirwala Power Company Limited, Foundation Power Company Daharki Limited and Uch-II Power Private Limited.
