PAKISTAN: AES initials further agreements

19 August 1994

AES Pakistan Private has initialed a further two agreements for its $350 million project to build, own and operate a 350-MW power station in Muzaffargarh, Punjab. This follows one initialled on 19 July in which the government guaranteed the performance of state-owned companies involved in the project (MEED 29:7:94).

A power purchase agreement with the government was initialled in early August. Electricity will be sold to the Water & Power Development Authority (WAPDA) at an average price of $0.065 a kWh for the first 10 years. This assumes that the plant will operate at 60 per cent capacity. In the longer term, the price will level out at about $0.059 a kWh. The terms of the agreement are in line with the government's policy to encourage private- sector activity in the energy sector (MEED 17:6:94)

AES and Pakistan State Oil (PSO) agreed the terms of the fuel supply to the new station on 7 August. PSO will provide residual fuel oil at an initial price of Rs 2,850 ($93.14) a tonne.

The engineering, procurement and construction contract is due to be awarded in late September. The International Finance Corporation (IFC), the private- sector investment arm of the World Bank, is advising AES on financing for the project, 80 per cent of which is expected to be covered by debt, and 20 per cent by equity. The final financing arrangement should be completed by the end of the year (see Special Report).

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