The local AES Pakistan Private has initialled the first of two agreements with the government to build a 350-MW build, own, operate (BOO) power station in Muzaffargarh, Punjab. The agreement covers government guarantees for the performance of state-owned companies involved in the project.

In the implementation agreement initialled on 19 July, the government guarantees the delivery of fuel oil by Pakistan State Oil and regular payment for power bought by Water & Power Development Authority (WAPDA), responsible for transmission and distribution.

AES is still negotiating pricing details for WAPDA’s power purchase. The price will be along the lines of the government’s policy to guarantee $0.65 per kWh produced, or $0.90 if the project is completed by December 1997.

The International Finance Corporation (IFC), the World Bank’s private investment arm, is understood to be working closely with the project but has not made a formal decision to participate. A board decision is not expected before October, the IFC says. AES officials are confident the IFC will provide loans and act as financial adviser, they say.

AES is evaluating bids by international contractors to engineer, procure and construct the plant and is to award a contract in July (MEED 17:6:94).