WASHINGTON, D.C., July 24 -- The International Finance Corporation (IFC) today signed an investment agreement to provide a comprehensive financing package to Gul Ahmed Energy Limited, Pakistan, which will build, own and operate a 125 megawatt power plant located in Karachi.
This will be one of the first private sector power projects to be established in Karachi, the key industrial and commercial center of Pakistan, which is currently facing a severe power shortage. The plant is to be completed on a fast-track basis, before the end of 1997, at an estimated cost of about US$138 million.
IFC will provide a financial package of US$69.1 million consisting of a US$27 million loan for its own account, a syndicated loan of US$35 million from international banks and financial institutions, an equity investment of up to US$4.1 million equivalent in the share capital of the company, and a risk management facility of up to US$3 million in IFC exposure to help the company hedge variable interest rate and currency risks. ING Bank of The Netherlands is expected to lead a syndicate of banks to provide a US$35 million Finnish export credit loan to complete the loan financing package. ING Bank is expected to also underwrite the IFC syndicated loan as well as the Finnish export credit loan.
"This will be IFC's third investment in private power projects in Pakistan, providing further support for Pakistan's policy of encouraging private investment in this important sector," said Mr. André Hovaguimian, Director of IFC's Central Asia, Middle East, and North Africa Department. "IFC hopes that this project will help alleviate power shortages faced by Karachi's industrial, commercial, and residential consumers and that it will contribute to the economic well being of the city."
The principal investors in the project are the Tomen Corporation of Japan, a Japanese trading company with interests in power and industrial sector investments, and the Gul Ahmed Group of Pakistan, whose members are shareholders of textile mills and other companies which own and operate their own power plants.
The Karachi Electric Supply Corporation, the state owned utility serving the Karachi area, will purchase the power plant's output for 22 years. Pakistan State Oil, the state owned petroleum company, will supply fuel for the same 22-year period.
IFC is a member of the World Bank Group and is the largest multilateral source of equity and loan financing for private sector projects in developing countries.
