ADB helps Pakistan tackle power shortages

ADB has agreed to lend up to $100 million to a privately owned gas-fired power plant in Pakistan. It is meant that will help alleviate chronic power shortages which are undermining growth and poverty reduction.

ADB's loan will fund construction of the Uch-II Power Project in Dera Murad Jamali in Balochistan Province, around 600 km north of Karachi. The plant, with a gross capacity of 404 megawatts and net capacity of 375 megawatts, will be located on surplus land at the existing Uch-I site. International Power plc of the UK, a leading independent power generation company and the single largest private investor in Pakistan's electricity sector will develop the site.

"Along with helping to address the current power shortfall, the project will tap an underused indigenous energy source to provide affordable electricity, which will help reduce expensive oil imports, relieve stress on Pakistan's foreign exchange reserves, and support overall energy security," said Michael Barrow, Director in ADB's Private Sector Operations Department.

To address these problems, the government is seeking to improve the investment environment and to scale up the energy sector with support from independent power producers. ADB has played a pioneering role in attracting private capital to the power sector, including financing the country's first private hydropower project and its first private wind power project.

"ADB's support for this project will reassure the developer and encourage co-financing support for future projects, which otherwise might not be forthcoming," said Takeo Koike, Senior Investment Specialist in ADB's Private Sector Operations Department.

The project will tap gas from the Uch field about 47 km from the site, with electricity supplied to the state National Transmission & Despatch Company under a 25-year take-or-pay power purchase agreement. The tariff structure will ensure that electricity is both affordable, and that the project is financially viable, with the operator able to recover costs. The facility will also lead to new jobs in a remote and economically deprived area of Balochistan, with up to 800 jobs created during construction. The plant is expected to take 30 months to build, with the project due for completion in late 2013.