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ISLAMABAD: The Water and Power Development Authority (Wapda) has proposed an appraisal session with Prime Minister Shehbaz Sharif in presence of Ministers for Finance, Water Resources and Planning, Development and Special Initiatives (PD&SI) to ensure fulfillment of its financing needs, well-informed sources in PM Office told Business Recorder.

The appraisal session has been proposed by Chairman Wapda, Lt General Sajjad Ghani (Retired) in a letter to Special Secretary to Prime Minister which relates to the matter of sustainability of developmental projects including Mohmand (MDHP), Diamer Bhasha (DBD), Dasu, Tarbela 5th Extension and Greater Karachi Water Supply Project K-IV. These projects come with stupendous benefits to Pakistan, including irrigation, flood control, food security and cheap power generation.

Wapda has undertaken a challenging and mammoth task of undertaking these projects which otherwise were mired in controversies and delayed for decades. This would be unprecedented wherein a department based on its balance sheet, sound debt servicing record and professional reputation will manage to re-orientate Pakistan’s trajectory of economic growth and prosperity.

Wapda receivables touch the Rs232.6bn mark

Wapda supplies over 31 billion units per annum @ Rs 3.51 per unit which essentially subsidizes the entire value chain in the energy sector and helps to reduce consumer end tariff.

Wapda has devised an innovative financing strategy where the Authority has to bear the overwhelming burden of raising finances while the Federal Government provides vital support. This strategy is based on the strength of a robust capital structure and improved cash flow from sale of power through CPPA-G. With initial spike in capex requirements, Wapda would be able to add approx. 37 billion units to the national grid by FY 2029-30 whereby the additional revenue would be used to meet the debt servicing and equity injection requirements going forward.

According to Chairman Wapda, total PSDP grant required for MDHP and DBD over the construction span is Rs 648 billion. FY 2022-23 allocation includes Rs 12.00 billion for MDHP and Rs 27 billion for DBD (Rs 20 billion for the dam part and Rs 7 billion for LA&R).

He maintained that Wapda would be contributing Rs 325 billion as equity for these three projects. This would be recovered through the tariff and is essentially hinged on timely payments by CPPA-G.

Talking about local commercial financing, Chairman Wapda further noted that local commercial financing requirement is Rs 525 billion. Wapda has already raised Rs 144 billion for Dasu HPP and can raise the remaining financing through asset backed Islamic financing (Sukuk Bonds/diminishing Musharakah) as well as GoP guaranteed commercial financing (TFC & term loans).

Chairman Wapda has claimed that it has adopted a multi-pronged strategy including Green Euro bonds, assistance from multilateral donor agencies/friendly countries, export credit agencies and syndicate loans.

The interventions include: (i) For Mohmand Dam, the foreign currency component is $ 716 million. The Arab Coordination Group comprising of IsDB, SFD, KFD and OFID have agreed to provide financing of approx $ 592 million through soft loans; (ii) loan agreements have been signed with IsDB ($ 180 Million), SFD ($ 240 million) and OFID ($ 72 million) ;(iii) foreign currency component of DBD dam part is estimated to be $ 1.190 billion and $ 2.555 billion would be needed for the power generation component.

Wapda has secured $ 500 million through issuance of Green Euro Bond to meet or bridge finance the financing needs of both under construction projects namely DBDP and MDHP. Wapda is expecting payments of approx. $ 50 million to cater for the forex requirements in the current year.

After explaining the background, Chairman Wapda sought PMO’s intervention on the following issues to implement these priority projects on time; (i) CPPA-G to clear outstanding Wapda dues of Rs 233 billion immediately; (ii) timely payments of forex by State Bank of Pakistan from $ 500 million Eurobond proceeds that Wapda has raised and; (iii) timely release of PSDP allocations for the major projects.

Copyright Business Recorder, 2023

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