PAKISTAN: Further support for private energy development

23 December 1994

The World Bank has approved two separate operations which support private sector participation in energy development. These are designed to improve the investment climate for privately sponsored energy and related infrastructure projects.

A new loan of $250 million has been approved to replenish the long-term resources of the private sector energy development fund (PSEFD). Co-financing is being provided by the Export-Import Bank of Japan (Jeximbank - $110 million) and the French government ($10 million).

The fund is used by investors to obtain financing for goods, works and services in the Hub river power scheme and other privately sponsored projects. PSEFD was established in 1988 with $464 million in loans from the World Bank, Jeximbank, the US Agency for Development (USAID), the Nordic Investment Bank and the French, Italian and UK governments. Its total commitment to the Hub river project is $572 million in subordinated debt, including $136 in standby funds (MEED 4:11:94).

Approval has also been given for a partial-risk guarantee under the bank's expanded co-financing operation (ECO) programme for up to $240 million of the commercial syndicated bank loan to the Hub Power Company (Hubco). The ECO guarantee protects investors against political risk while leaving commercial risk with the lender. This partial risk guarantee is a pioneering example of the bank's wider mainstreamed use of guarantees as a normal business tool, approved by the board in September 1994 (MEED 11:11:94).

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