Asian Development Bank’s loan helps K-Electric to turn profitable

FRANKFURT: The Asian Development Bank’s (ADB) loan helped K-Electric to come into the black and the utility’s profitability prompted Pakistan’s government to divest its shares from other state-run power companies, the bank said.  

“Two-thirds of the non-sovereign operations completed in the reporting period were success stories,” the bank said in its ‘ADB’s Development Effectiveness Review 2015’. “One, financed by a $150 million ADB loan, turned around Pakistan’s only privatised integrated electricity utility and helped to guarantee proper generation, transmission, and distribution of power for 2.2 million consumers in the country’s economic capital of Karachi.”

The report said by the time the loan closed in 2013, the company had added more than 1,000 megawatts of new power generation capacity and energised 10 new grids. “Its $15 million in monthly losses at project start turned into its first profit in 17 years in 2012, an estimated $35 million,” 

The bank added that because of the project’s success Pakistan intends to divest its shares in other public sector entities.

The ADB further said around 51.4 million people have no access to electricity although the country’s electrification rate stands at around 73 percent. 

The report said infrastructure projects that benefit lagging areas made up 50 percent of the infrastructure operations in both the ADB-wide and ADB’s development effectiveness categories during 2013–2015. It cited $218 million emergency reconstruction project as an example.

“It will help improve well-being, create income opportunities, and build the resilience of poor communities in a part of the country where economic growth and social development have fallen behind,” the report said.

The project will finance the rebuilding to multi hazard-resilient standards of high-priority roads, bridges, irrigation, and flood management infrastructure in districts in the Punjab province heavily affected by flooding in September 2014. This will free the government to finance housing and livelihood cash grants for the area’s most vulnerable   people and help restore the economic activity essential to their survival.

The report said a $65 million loan for a build-own-operate-transfer project to construct a 102 megawatts run-of river hydroelectric facility will alleviate severe power shortage in Pakistan. The plant will charge less for the electricity it supplies over the 30-year contract period than do current facilities using imported.

“Besides helping to spur economic growth and reduce poverty, the plant’s use of hydropower will greenhouse gas emissions equivalent to about 254,000 tons of C02 a year,” the report said.

The ADB’s financing in Central Asia rose from $856 million in 2014 to $1.1 billion in 2015, mostly for transport operations. This included a $250 million loan to Pakistan as part of a Central Asia Regional Economic Cooperation project to improve border infrastructure. “It will quicken processing at two key crossing points between the country and Afghanistan and at a third on the only currently open land route between South Asia and Central Asia,” the report said.