On June 29, 2012, MIGA issued a guarantee of $148.5 million to cover an equity investment by K-water, acting on behalf of itself and Daewoo Engineering and Construction Company, in Star Hydro Power Limited incorporated in Pakistan through KDS Hydro Private Limited of Singapore. The coverage is for a period of up to 20 years against the risk of breach of contract.
Star Hydro Power Limited will build, own, operate, and transfer a run-of-river hydropower plant situated 120 kilometers northeast of Islamabad near the village of Patrind in the city of Muzaffarabad. The capacity of the plant will be 147 megawatts with annual production of 575 GWh. The total project cost is approximately $409 million. Electricity generated by the plant will be sold under a 30-year power purchase agreement to the state-owned National Transmission and Dispatch Company limited.
The project will help alleviate power shortages in Pakistan, lower the country’s average electricity generation costs, and reduce reliance on imported fuel oil. Further, the project reduces the country’s greenhouse gas emissions and it is also expected to generate new jobs during construction and operation periods.
The project is aligned with the World Bank Group’s Country Partnership Strategy for Pakistan, which acknowledges that power is the country’s most pressing infrastructure need. In particular, the strategy calls for the development of renewable power generation, such as hydropower.
This project is also aligned with MIGA’s strategic priorities of supporting investments in complex infrastructure projects, South-South investments, as well as investments into countries eligible for assistance from the International Development Association.