MIGA Insures Hydropower Plant in Pakistan
Project Will Help Country Alleviate Power Shortages
Washington, June 28, 2012—The Multilateral Investment Guarantee Agency (MIGA)—the political risk insurance arm of the World Bank Group—today announced it is supporting a hydropower plant in Pakistan. In addition to alleviating chronic power shortages, the plant will contribute to lowering the country’s average electricity generation costs and greenhouse gas emissions, and reducing reliance on imported fuel oil. The project’s demonstration effect is also significant, as it shows other potential investors that experienced and reputable foreign sponsors are implementing a high-profile project in Pakistan.
MIGA has issued guarantees of $148.5 million to cover an equity investment by Korea Water Resources Corporation (K-Water) and Daewoo Engineering & Construction (Daewoo) in Star Hydro Power Limited incorporated. MIGA’s coverage is for a period of 20 years against the risk of breach of contract. The project is also supported by project finance loans from the International Finance Corporation, the Asian Development Bank, the Export-Import Bank of Korea, and the Islamic Development Bank. Korea’s Global Infrastructure Fund—established by public funds and private investors to promote Korean companies’ foreign investment—is also investing in the project.
This project represents MIGA’s first guarantee in support of a Korean investor. For the project, K-Water and Daewoo will develop, construct, and operate a 147 megawatt run-of-the-river hydropower plant situated 120 kilometers from Islamabad under a 30-year build-own-operate-transfer scheme. Electricity generated by the plant will be sold to the state-owned utility under a power purchase agreement. By providing this guarantee to a much-needed infrastructure project, MIGA played an important role in providing protection against political risks at a time when commercial insurers are not open to long-term guarantees in Pakistan.
MIGA has recently undertaken extensive investor outreach in Korea in collaboration with various institutions including the government of Korea, export credit agencies, and commercial banks; this project further cements these important relationships.
"Right now, more than 30 percent of Pakistan’s population does not have access to electricity," noted Izumi Kobayashi, MIGA’s Executive Vice President. "This project will help fill this gap." She continued, "Supporting complex infrastructure projects is a key priority for MIGA and we expect this project will improve the lives of Pakistani people as the availability of power is increased in the country."
MULTILATERAL INVESTMENT GUARANTEE AGENCY
A Member of the World Bank Group
1818 H Street, NW, Washington, DC 20433
Mallory Saleson, MIGA
Tel: +1 202 473-0844
Rebecca Post, MIGA
Tel: +1 202-473-1964
Cara Santos Pianesi