PAKISTAN: Hub power project syndication launched

01 July 1994

Organisers of the $686 million 12-year credit and standby facility for Hub Power Company are confident the deal will close before the end of September.

Around 50 banks have been approached to participate. The loan will be repayable over 12 years, with four years' grace. Loan margins will be 2 per cent over the London interbank offered rate (Libor) for the first eight years and 2.25 per cent over Libor thereafter.

The rate for standby loans will be 0.5 per cent above the rate for the loan. No details were available on the additional front-end fees to be charged by banks. There will also be interest of 0.75 per cent over Libor for committed but undisbursed loans.

A portion of the debt has been underwritten against political risk by the World Bank and The Export-Import Bank of Japan (Jeximbank). The remainder is backed against commercial risk. The full $686 million is guaranteed as follows:

$240 million by the World Bank's ECO facility, of which $40 million are for standby loans

$120 million by Jeximbank, of which $20 million is for standby loans

$194.6 million by Italy's SACE

$45.1 million by France's Coface

$86.4 million by Japan's Ministry for International Trade & Industry (MITI).

The arranging banks will keep a minimum of $20 million-25 million each. They are Bank of Tokyo International, Citibank International, Credit Lyonnais, National Westminster Bank, and The Sakura Bank with Mediocredito Centrale, as joint co-ordinators for SACE financing.

The total cost of the project has been revised to $1,640 million at December 1993 prices, from earlier estimates of $1,800 million. Other financing arrangements will involve:

$310 million in equity, plus an additional estimated $77.5 million in stand-by funds. One-third of the equity will be held by promoting shareholders Xenel Industries of Saudi Arabia, the UK's National Power International, Mitsui & Company and Ishikawajima-Harima Heavy Industries (IHI), both of Japan, and K&M Engineering of the US. Another third will be raised through a local share offer, and the remainder is to be raised offshore. Morgan Grenfell of the UK is acting as arranger.

A local currency loan from the government's National Development Finance Corporation of an estimated $133 million, plus $15 million in standby funds;

A $36.9 million concessionary loan from the UK's Commonwealth Development Corporation;

$465 million in loans through the World Bank-funded public sector energy development fund, plus additional funds for standby loans.

Construction is on schedule, project sources say. The aim is to bring the first of four power units on line in June 1996, with the last to be completed by March 1997 (MEED 18:3:94).

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