Uch Power Project-II of 375 MW (gross 404 MW) which will attract $500 million foreign investment has achieved financial closing one month later than the timeline agreed with the government. The combined cycle gas turbine project will be established near Dera Murad Jamali, District Nasirabad, Balochistan, and is based on indigenous low btu gas from Uch gas field.
On March 3, 2010, Private Power and Infrastructure Board (PPIB) and Uch-II Power (Private) Limited, an affiliate of Uch Power (Pvt) Limited, signed a Letter of Support (LoS) for a 404 MW (gross) capacity power project Upon financial closing, PPIB also issued sovereign guarantee on behalf of the Government of Pakistan (GoP) in favour of project company to secure the payment obligations of power purchaser.
Official sources told Business Recorder that PPIB Board in its meeting in April, presided over by the Minister for Water and Power, Naveed Qamar granted relaxation of one month to the project. According to the rules PPIB imposes penalty on the project for not achieving financial close as per the agreement.
The project is expected to be commissioned by December, 2013. The OGDCL will supply gas to the project from low btu Uch gas field under a long term Gas Supply Agreement (GSA). The electric power generated from the project will be sold to NTDC under a 25 year Power Purchase Agreement (PPA).
The project will bring foreign investment of around $500 million to the country. The project is being financed through debt equity ratio of 75:25. The International Power UK which is a blue chip international investor with vast experience of developing power projects around the world is main sponsor of the project.
The sponsors are investing $124 million through equity. Debt financing of $371 million for the project would be provided by foreign lenders including (i) Asian Development Bank (ADB); (ii) International Finance Corporation (IFC); (iii) Islamic Development Bank (IDB) and (iv) Export-Import Bank of Korea (KEXIM). Financial closing of a large IPP requiring investment of around $500 million demonstrates the confidence of international investors and lenders in the economy and power sector.
According to an official statement, in view of the prevailing power shortage and increasing dependence on imported fuel oil, the Uch-II power project based on indigenous low btu gas is very important from energy security and economic perspective.
"The project will not only help in curtailing the present power shortage but also provide cheap electricity to the consumers and save precious foreign exchange in oil imports. In addition, the project will also bring revenue generation for OGDCL as the low btu gas cannot be injected to national gas pipeline system and could not be used for any other purpose except power generation," the statement added.
The project located in remote and under-developed area of Balochistan, will work as a catalyst for socio-economic uplift of the area. This will generate economic activities and create employment opportunities for the people of the area. The Project will also entail improvement of the basic infrastructure in the vicinity and will be helpful in poverty alleviation of the people of the remote area. The implementation of Project shows the seriousness of Government of Pakistan to develop Balochistan and eliminate the hardships of the people, sources maintained.
PPIB with proven track record of successful induction of 25 Independent Power Producers (IPPs) totalling around 6500 MW capacity with investment of around $7 billion has achieved another major milestone with the financial closing of its largest gas based IPP under the current policy of government for private power projects.