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May 22, 2021

Govt plans to raise $500mln from first green bond sale next week

KARACHI: Pakistan plans to raise $500 million next week with the sale of a debut green bond that may lead the way for similar deals from the nation to fund hydroelectric projects, Bloomberg reported on Friday.

Pakistan's Water and Power Development Authority (Wapda) is looking to sell a 10-year note this month, and intends to offer more environmentally-friendly debt over the next two years, said Muzammil Hussain, chairman of the organization.

Wapda is launching Eurobonds without a sovereign guarantee of the government owing to positive corporate family ratings -- B3 stable by Moody’s -- by leading international credit agencies.

Wapda needs more than $2 billion in foreign funds for the two mega projects but plans to raise such funds in a staggered manner in line with construction needs to avoid unnecessary financing costs.

The nation aims to tap soaring investor demand globally for green debt as it pushes forward with plans to increase renewable and hydroelectric generation to 60 percent of total electricity by 2030.

Pakistan is targeting economic growth of 5 percent in the year starting July from around 3 percent this fiscal year with the help of spending on large infrastructure projects. The funds from the proposed dollar bond will be used to fund the Diamer Basha and Mohmand dams in the nation, according to Wapda’s Hussain. “We are taking a lead against fossil fuel,” he said by phone.

Pakistan sold $2.5 billion of dollar bonds in March, its first since 2017, in a sign of investor demand for debt from the nation. Fitch Ratings affirmed its B- ratings for Wapda, the same as for sovereign, earlier this year. “The government currently provides a large share of financing for power-related capex, but the policy direction for Wapda is to expand its own indebtedness without the government’s commitment,” Fitch said at the time. “The government owns 100 percent of WAPDA and has a tight grip on its overall operation, including financing.”

Government is expecting the bond to attract almost the same rate as that of Pakistan Sovereign papers in view of equivalent credit rating. Wapda would use the funds for both projects on a needs basis and would again turn to the international capital market when more funds would be required.

The government had started the construction on Mohmand dam in June 2019 and Diamer-Bhasha dam in May this year. Mohamand dam will have the gross capacity of 1.9 million acre feet (MAF) water and live capacity of 0.67 MAF with power generation potential of 800 megawatts and annual energy production of 2,862 GWh.