The Washington-based International Finance Corporation (IFC) has agreed to provide financing worth a total of $103.4 million for two private sector projects, the Kohinoor power plant in Lahore and a new port terminal in Karachi.
The two agreements were signed during the first visit to Pakistan by Jannik Lindbaek, the IFC’s executive vice-president on 21-26 January. He said the two agreements were ‘an important beginning in IFC’s efforts to promote private sector financing of infrastructure projects in Pakistan and to support the government’s privatisation programme.’
The IFC’s support follows new credit lines approved by the World Bank in December to support private sector energy development and infrastructure projects (MEED 23:12:94).
The IFC has agreed to provide up to $67.9 million to Kohinoor Energy, a company set up build-own-operate (BOO) a 120-MW diesel-fuelled power plant near Lahore. The financing consists of loans of $34 million, including up to $22 million for the shareholder’s account. It will also make a $1.5 million equity investment in the company and take up a 15 per cent shareholding.
The other Kohinoor shareholders are the local Saigol Group with 48 per cent, Japan’s Tomen Corporation with 20 per cent and Wartsila Diesel Oy of Finland with 2 per cent. The remaining 15 per cent will be offered to the public.
Partial operations should begin in October 1996 and the plant will be fully operational by March 1997. The plant consists of eight 15-MW diesel engines and a 6-MW steam turbo-generator powered by exhaust gas.
The engines and turbines are supplied by Wartsila. Tomen is providing the project supervision, design and construction. The two will deliver the plant on a fixed-price turnkey basis with guaranteed output and fuel consumption.
Wartsila will operate the plant under contract for at least four years after completion. The local Water & Power Development Authority (WAPDA) has a 22-year power purchase agreement. Pakistan State Oil (PSO) has a fuel supply agreement for the same term.
Kohinoor is to be one of the first fast-track projects to be built under the government’s new development plan to encourage private power generation investment, the IFC says. ‘Since diesel plants can be built in less than two years, they present an economic solution to the present power shortage problem,’ Lindbaek said. ‘We hope this project will set the stage for future private power transactions in Pakistan.’
The IFC’s $34 million financing of the Karachi port terminal includes $22 million for the shareholder’s account and a $1.5 million equity investment in the project, which is to be run by Premier Container Terminal. The project’s other sponsors include the local Premier Mercantile Services, one of the country’s largest private stevedore and shipping agencies. Other sponsors are the Pakistan National Shipping Company and the Bahria Foundation. During development, the IFC advised the sponsors on structuring the implementation agreement with the Karachi Port Trust.
The new terminal will cost an estimated $100 million and is designed to provide increased container cargo handling capacity at Karachi port of up to 450,000 TEUs (20-foot equivalent units) a year. IFC’s loan will help upgrade existing berths and install modern container handling equipment and a computerised traffic data processing system.
Pakistan is one of IFC’s largest clients, accounting for 4.5 per cent of the IFC investment portfolio at December 1994. In addition to several private infrastructure projects in Pakistan, the IFC has also been active in developing local capital markets.
Lindbaek was due to meet Prime Minister Benazir Bhutto, as well as key federal ministers, senior government officials and business representatives.