Dasu hydro project: ECC likely to give approval to financing guarantee

The Economic Co-ordination Committee (ECC) of the Cabinet is likely to give its approval to government guarantee for the proposed commercial financing of US $350 million from the international capital market under World Bank partial credit guarantee of US $210 million for Dasu Hydropower project.
Sources said that Ministry of Water and Power has prepared a proposal to be submitted to the ECC for approval, stating that the PC-I of the Dasu hydropower project was approved by ECNEC at a cost of Rs 486 billion (USD 4.38 billion) in March 2014.
The installed capacity of project is 2160 MW (6x360 MW) for stage-I, while the project would provide 12,225 GWh of clean electricity to the national grid annually. Overall implementation schedule for construction of stage-I from start of mobilization to commissioning of the final 6th generating unit is five years.
The project is being partly funded by the World Bank through IDA Credit; USD 573 million credit is operational while the additional IDA/IBRD credit of USD 273 million is expected in the 2017 cycle alongwith a Partial Credit Guarantee (PCG) of USD 920 million (USD 460 million x 2) to raise the foreign cost component (FCC).
For the local commercial requirement, a loan agreement of Rs 144 billion comprising both conventional and Islamic Finance Facility has been agreed with a consortium of seven local banks (with HBL as the lead arranger). Out of this amount, Rs 88 billion would be raised against the GoP guarantee while Rs 56 billion would be against WAPDA''s balance sheet.
For the foreign cost component, it was agreed after lengthy deliberations with international banks along with the World Bank, that Wapda would raise US $350 million through the international capital market for a tenor of 10 years by using PCG of up to 60% ie US $210 million and the remaining amount (both principal and interest) would be guaranteed by the GoP.
However, to provide standalone exposure to WAPDA in the international capital market, the Interest During construction (IDC) of one year would be exclusively on Wapda''s balance sheet with no GoP/WB guarantee. The remaining FCC of approximately US $500 million would be raised through loan/bond in early 2018. This would help mitigate the negative impact of IDC on the project.
Finance Division, in its letter, has conveyed its concurrence to avail $350 million Credit Suisse proposed loan facility for Dasu Hydropower Project on the following terms and conditions: (i) amount - $350 million; (ii) tenor - 10 years with grace period of 6 years; (iii) interest rate - Libor Swap rate +3.0 per cent; (iv) arrangement fee - 1.5 per cent; (v) commitment fee ( 40 per cent of margin) at 1.2 per cent; (vi) transaction cost (capped) - $250,000; (vii) underwriting fee - 0%; (viii) and World Bank IDA guarantee fee - 0.75 per cent.
After explaining the entire scenario, the Ministry of Water and Power has sought approval of the ECC for provision of GoP guarantee for $350 million loan to cater to the amount (both principal and interest) exceeding World Bank''s PCG of $210 million (60% of the notional amount). On a reference from Wapda, Finance Division has conveyed its concurrence to avail $350 million Credit Suisse proposed loan facility for Dasu Hydropower Project, subject to ECC''s approval.