ADB’s $1 billion stalled power project sees daylight

ISLAMABAD: The Asian Development

Bank’s (ADB) one billion dollar worth of

stalled project to curb cash bleeding in the power sector is all set to commence on Thursday (today) after four years of quiet period, officials said on Wednesday.

The ADB’s funded multi-tranche financing facility is to become operational for placing advanced metering infrastructure (AMI) in two power distribution companies.

The bidding for the first phase of procurement of AMI under ADB’s funded $990 million

multi-tranche financing facility (MFF) for

Islamabad Electric Supply Company (Iesco) is scheduled to be opened today (Thursday) and for Lahore Electric Supply Company (Lesco) by next month.

In 2015, the ADB approved $990 million MFF during the tenure of the last government, but the project could not become operational despite elapse of several years.

At one stage, the government almost refused to get the loan from the ADB. The efforts were made during the tenure of caretaker setup to revive the project but all proved futile.

In February last year, the power division rejected the AMI program and Pakistan had to pay around $1 million commitment charges on $380 million component of the loan program.

The original plan involved replacing of 30 percent existing meters from all discos, starting with two power distribution companies.

The entire project across the distribution system is expected to take almost a decade to complete.

The poor financial conditions of power distribution companies indicate that they are not in a position to pay a compound interest rate of 17 percent on the loan.

The ADB’s loan was agreed based on the

balance sheets of the power distribution companies and under the current federal re-lending policy,

the interest rates are about three times more

than what Pakistan actually pays to the global lenders.

The current government decided to activate the stalled project and floated international tender for procurement of advanced metering infrastructure for Iesco and Lesco. The Iesco’s AMI is estimated to cost $120 million while for Lesco it might cost $240 million.

In case of a joint venture, the cumulative amount of bidders' participation (all partners combined) should exceed $100 million and participation of one of the partners – in at least one contract – must exceed $40 million.

Officials said the expected improvement following the smart metering could recover the cost of the project in few years as it would increase the credibility of the country in front of international lenders as well.

Backing out from the committed loan is not good for the country’s international image, the officials added.