WASHINGTON, D.C., April 7 -- The International Finance Corporation (IFC) today signed an investment agreement to provide up to US$49.5 million to AES Lal Pir (Pakistan) Limited, a Pakistan-based company, which will build, own, and operate a 362 megawatt power plant located in the district of Muzaffargarh.
This power plant will be one of the first projects to be built under the Government of Pakistan's new policies which encourage private investment in power generation by providing attractive returns to investors. The project is intended to be completed on a fast-track or accelerated basis.
IFC's financing consists of a loan of US$40 million and an equity investment of 10 percent of AES Lal Pir's share capital (US$9.5 million). AES Corporation will subscribe up to 90 percent of the Company's share capital. In addition, the Bank of Tokyo has arranged a loan of Japanese Yen 20,250 million (approximately US$209 million) from international commercial banks with support from Japan Exim. The total project cost is approximately US$344 million.
AES Corporation, one of the largest independent power producers in the U.S. with worldwide operations in China, India, Europe, and Latin America, will operate and maintain the power plant. The plant will have a single residual fuel-oil boiler and a single steam turbine generator. Mitsubishi Heavy Industries of Japan will deliver the plant on a turnkey basis (i.e., fixed price, fixed delivery date, and guaranteed performance). Commercial operations are expected to begin in December 1997.
The Water and Power Development Authority (WAPDA), a state owned utility, will purchase the project's capacity and energy under a 30-year Power Purchase Agreement. Pakistan State Oil (PSO), the state owned petroleum company, will supply fuel for the same 30-year period under a Fuel Supply Agreement. The project will meet the World Bank's and Pakistan's environmental guidelines.
"Having worked closely with the Government of Pakistan in defining a greater role for the private sector in power generation, IFC is pleased to be associated with this project," said Mr. Wilfried Kaffenberger, Vice President of IFC. "Mobilization of debt and other investment resources for infrastructure projects, without government guarantees, is an important objective for IFC, and we are happy that we have been able to achieve this. For this success, I would like to acknowledge the efforts of the Bank of Tokyo and Japan Exim in arranging the commercial bank co-financing with IFC."
Mr. Dennis Bakke, CEO of AES Corporation said: "We commend the Government of Pakistan for so rapidly putting together a comprehensive set of policies to meet their power needs and to encourage private investment in their power generation industry."
Mr. Bakke added: "We would also like to thank the Department of Energy and Secretary O'Leary who conducted an important trade mission to Pakistan last year. Her support for private projects has helped to crystallize the policy framework and incentives that have created an attractive investment climate in Pakistan."
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.
