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Tarbela, Mangla, Ghazi Barotha to be mortgaged

Wapda has come up with a unique plan to mortgage the Tarbela, Mangla and Ghazi Barotha power turbines to raise $3 billion to fund the under-construction Bhasha Dam, a high-level government meeting was told on Friday.

The proposal, described by Wapda as Plan-B, is now under consideration after the Asian Development Bank, like the World Bank, declined to fund the project unless a No Objection Certificate (NOC) was obtained from India. The Wapda authorities vow to complete the project without the help of the ADB and the World Bank.

When contacted, Dr Nadeemul Haq, Deputy Chairman Planning Commission, said: “Yes, the meeting discussed the Plan-B of Wapda which needs to be further refined. The Wapda chief has been asked to contact financial experts to finalise the financial plan for the project.”

About mortgaging Wapda’s assets, he said that it was not so simple keeping in view the current global sentiments about Pakistan.

For what is going to be the final round, the vice chairman of the ADB is coming to Pakistan in September to discuss this critical issue but the Pakistani managers are determined to find alternative funding sources under the Plan-B.

A high-level meeting of top officials of various ministries was held here on Friday to discuss the way forward to cope with the funding crisis for the Bhasha Dam. Attended by deputy chairman of the Planning Commission, secretaries of finance, Planning Commission, additional secretary of EAD and top officials of the Ministry of Water and Power, Wapda Chairman Mr Mohammad Shakil Durrani presented the Plan-B under which a special purpose vehicle (SPV) will be made to chalk out the financing plan for the project.

The Wapda chairman was not available for comments, but a source close to him said Pakistan would ask the ADB vice chairman in plain words if the ADB wanted to help Pakistan and whether funds would be released immediately. Otherwise, Pakistan will say no to the bank to avoid wasting more time.

Experts say SPV is usually a subsidiary company with an asset/liability structure and a legal status that makes its obligations secure even if the parent company goes bankrupt. The shares of the company will also be floated in the stock exchange to generate finances.

Under this arrangement, institutional investment and loans from local banks would be arranged, Sukuk bonds would be floated and the instrument of public-private partnership would also be introduced.

The official, while quoting Shakil Durrani, explained that all the turbines of Tarbela, Mangla and Ghazi Barotha hydropower project would be pledged to generate about $3 billion.

To a question, the official said that the loans Wapda had earlier obtained against the securitisation of Mangla assets will be paid back in October. Thus Mangla assets would again be free to be pledged to raise funds for the Bhasha Dam.

The official said that Tarbela generates 15 billion units of hydro-generation, Mangla 4 billion units and Ghazi Barotha 4.5 billion units. After these assets are pledged, the tariff of hydel electricity would also increase, but the people will have no option but to swallow this bitter pill after the ADB’s refusal to fund the project.

The Wapda chairman, according to the official, told the participants of the meeting that under his Plan-B, Pakistan will obtain suppliers credit from China and hold international competitive bidding (ICB) as per the PPRA rules, but only those companies would be selected which will come up with up to 80 percent financing.

“Mr Durrani also informed the meeting that many international companies from Europe, China, Korea and Russia have shown interest to provide the equipment to be used in building the Bhasha Dam,” the official disclosed.

Deputy Chairman Planning Commission Dr Nadeemul Haq in the meeting asked the Wapda chief to contact international financial experts to make a financial plan for the project.

The financial experts would suggest Pakistan how to effectively securitise Wapda’s assets to generate maximum funding. The financial plan for the project will be completed in 5-6 months time.

The Wapda chief, the official said, informed the participants about the civil works on the dam, and that work on diversion tunnels and underground powerhouse needed $2.5 billion to be completed.

Prime Minister Raja Pervaiz Ashraf will be briefed after Eidul Fitr about the strategy carved out to cope with the funding issue.

Once completed, the dam will generate 19 billion units of hydro generation in one year and Pakistan would have electricity of $5million every day or $1.8 billion in one year and with the completion of this dam, the life of Tarbela Dam would increase by 50 years.

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