Water and Power Development Authority plans Rs 7 billion bond issue in January

KARACHI (December 11 2002) : The Water & Power Development Authority (Wapda) plans to float Rs 7 billion bonds next month, having a tenor of five years, which aims to partly finance the Ghazi Barotha hydel project, the country's biggest.

It would be Wapda's 10th bond issue and its size is of Rs 7 billion, inclusive of a green-shoe option of Rs 2 billion, making it the largest Wapda Bond to date, Benzair Khurshid of Khadim Ali Shah Bukhari said.

The Bond is being advised and arranged by ABN Amro Bank NV, Muslim Commercial Bank Ltd and Khadim Ali Shah Bukhari & Co Ltd.

The 5-year bond carries a floating rate of return linked to the State Bank of Pakistan discount rate currently at 7.50 percent plus 0.50 percent, making the present profit rate 8.00 percent per annum, Benzair said.

The bond will be secured against an unconditional and irrevocable first demand guarantee from the Ministry of Finance, Government of Pakistan.

The bond will finance Wapda's various development activities, notably the Ghazi Barotha Hydropower Project and its extra high voltage transmission lines.

The Ghazi Barotha Project will be the second largest hydropower project in Pakistan, designed to be environmentally sustainable and to meet the acute peak power shortage in the country.

Wapda has already received $1.2 billion for the project from international funding agencies, and plans to raise part of its commitment for the remainder through the 10th issue.

The financing provided by the foreign agencies was World Bank $350 million, Asian Development Bank $300 million, JBIC $304 million, European Investment Bank $46 million and Islamic Development Bank $35 million.

Analysts viewed that Pakistan's per capita electricity consumption remains low, compared to its regional peers, which represents a high potential for growth in electricity demand. Also, economic growth will result in increased electricity consumption.

With over 10 million customers, Wapda is inherently a valuable franchise. The organisation has recently refocused its efforts on improving efficiency, accelerating development activity and putting its finances on a solid footing. Of the total installed capacity of 8,831MW, hydel generation constitutes more than 50 percent.

Hydel generation costs are approximately 90 percent lower compared to the cost of thermal power generation. Wapda's own generation cost has been much lower than that of the IPPs.

The commissioning of 1,450 mw Ghazi Barotha hydel power project will provide Wapda additional low-cost power and represent a return to its original mission of developing the country's hydro potential.

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