Government plans to raise $ 500 million through first sale of green bonds next week

KARACHI: Pakistan plans to raise $ 500 million next week with the sale of a first green bond that could pave the way for similar deals by the nation to finance hydropower projects, Bloomberg reported on Friday.

The Pakistan Water and Electricity Development Authority (Wapda) plans to sell a 10-year note this month and intends to offer more environmentally friendly debt over the two coming years, said Muzammil Hussain, president of the organization.

Wapda is launching Eurobonds without government sovereign guarantee due to positive ratings of corporate families – B3 stable by Moody’s – by major international credit agencies.

Wapda needs more than $ 2 billion in foreign funds for the two megaprojects, but plans to raise these funds in installments based on construction needs to avoid unnecessary financing costs.

The country aims to tap the growing investor demand around the world for green debt as it pursues plans to increase renewable and hydropower production to 60% of total electricity by 2030.

Pakistan is targeting economic growth of 5% for the year from July, up from around 3% for this fiscal year, thanks to spending on major infrastructure projects. The funds from the proposed dollar bond will be used to finance the Diamer Basha and Mohmand dams in the country, according to Hussain of Wapda. “We are taking the lead against fossil fuels,” he said over the phone.

Pakistan sold $ 2.5 billion worth of bonds in March, its first since 2017, a sign of investor demand for the nation’s debt. Fitch Ratings confirmed its B- ratings for Wapda, the same as for sovereigns, earlier this year. “The government currently provides a significant portion of the funding for energy-related investments, but the political direction for Wapda is to increase its own debt without government commitment,” Fitch said at the time. “The government owns 100% of WAPDA and has a strong grip on its overall operation, including funding.”

The government expects the bond to attract almost the same rate as Pakistani sovereign papers, given the equivalent credit rating. Wapda would use funds for both projects as needed and would turn to the international capital market again when additional funds were needed.

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

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