Pakistan PPA “most interesting in the world”

A 50MW wind project sponsored by a North American PE-fund-turned-developer has reached financial close, bringing the country closer to its 1GW target by 2018.

Canadian renewable energy firm JCM Power has achieved financial close on a 50MW wind power project in Pakistan worth just above $100 million. 

The Hawa wind farm, located in the Sindh Valley, is part of Pakistan's wind energy development pipeline of over 1GW scheduled for installation by 2018. Currently under construction, the project is scheduled to become operational by February 2018. 

Bangkok-based Modern Energy Management is advising on development. The firm is not new to the market, having also advised on two utility-scale wind farms of 50MW, each backed by CapAsia and commissioned in 2014 and 2015.   

Aaron Daniels, managing director of Modern Energy Management, believes Pakistan's wind energy sector offers excellent opportunities for emerging-market investors. Some key market constraints have recently been eased, including access to grid connection, he observed. 

Last month, a consortium of four institutions led by International Finance Corporation provided $238 million in financing for a 150MW wind portfolio, the largest wind power facility in Pakistan. 

Competitive bidding for wind projects through reverse auctions, introduced by the Pakistani government earlier this year, is also helping lower the cost of energy. Wind power remains considerably more expensive in Pakistan than neighbouring countries, Daniels told Infrastructure Investor

The country's power purchase agreement framework is another plus for the market. “Pakistan's PPA is probably the most interesting one in the world. It is bankable and creates a very attractive environment, especially for the equity side, offering potential returns of up to the high-teens,” he said. 

The market is also less competitive than most, Daniels pointed out. Many investors remain hesitant as they see Pakistan as a high-risk country, a perception rooted in the nation's geopolitical issues rather than risks borne by the power sector, he noted. 

As the market evolves, Daniels anticipates the auction mechanism to be further refined. Access to financing also remains a challenge for investors and developers looking to participate in the market.