The Asian Development Bank (ADB) has approved a gas-fired power plant for Pakistan that would provide additional low-cost electricity to consumers to address the looming power shortage. The project involves development of a 171-megawatt combined cycle low Btu (British thermal unit) gas-fired power plant, which is expected to supply base load power to the national grid.
Btu is a basic measure of thermal energy. The facility will be located in Daharki, District Ghotki, in Sindh, and gas would be supplied from the nearby Mari gas field. The plant would increase the net power generation capacity which should help reduce power demand needed for economic growth. About 60 percent of Pakistan''s population has access to electricity from the national grid. The rest use kerosene, wood and other bio-fuels for lighting, cooking and heating.
The project will promote efficient management of natural resources, as it would tap an otherwise idle gas resource and pave the way for low-cost generation given the proximity of the plant to the gas field. The project cost is approximately $200 million, which would be the first ''gas only'' plant developed under the 2002 power policy of Pakistan and is expected to begin commercial operations in the fourth quarter of 2009.
A growing population and thriving economy need more power. The average annual electricity demand of Pakistan is currently increasing by 11 percent, with urban areas experiencing significantly higher demand growth. However, power supply is not in conformity with the demand. ADB estimates that Pakistan needs to add about 2,000 megawatts every year to avoid shortages in future.
ADB is a major source of external investment in the energy sector in Pakistan, having provided about one-third of the total external sources. "The proposed assistance is consistent with the energy strategies of ADB and the government of Pakistan.
In addition to its long-term partnership with the government in the power sector arising from its public sector activities, ADB is also, since 1996, providing private-sector loans and investments," said Robert Bestani, Director-General of ADB''s Private Sector Operations Department.
ADB has approved an equity investment of up to $2.75 million and guarantee for a $44 million loan for the project holding company. Subject to approval of concerned authorities, both the guaranteed loan and the equity investment will be contributed by the holding company as equity in Foundation Power Co Daharki Ltd, which will own the power plant.
Proceeds from the equity investment and guaranteed loan will be partially used for designing and constructing the project. A consortium of local and international banks has provided $150 million in debt financing for the project.
"In addition to the positive development impacts of the gas-fired power plant itself, the proposed transaction is designed to encourage equity investors to again look at the Pakistan generation sector as an attractive investment opportunity, while not increasing costs for the consumers or the government.
Further, it is designed to draw in future offshore funding for power project financing. Such investments are crucial to complement the government''s own efforts in the sector," said Martin Tornberg, an Investment Specialist with ADB.