At FMO’s 2022 Future of Energy Conference, FMO and Proparco announced the signing of a USD 100 mln syndicated facility to support K-Electric, a Pakistani integrated power generation, transmission, and distribution company. FMO functioned as the lead arranger of this syndication, contributing USD 68.6 mln, with Proparco functioning as parallel lender for the remaining amount. The syndicated facility will be used to support the electricity network by improving the distribution network’s safety and loss reduction, while also resolving the power imbalance through new connections given the rising increase in demand.
K-Electric is the only vertically-integrated private power utility provider serving over 3 million residential and commercial clients in Karachi, Pakistan’s largest city. Active in generation, transmission, and distribution, the company generated 19,487GWh in the past financial year and a transmission and distribution network spanning across over 6600 square kilometers.
Within the past decade, there had been an increase in the demand-supply gap within Pakistan. However, following the induction of new generation plants and entrance of Independent Power Producers, sustained investment in the transmission and distribution sector is required to channel the energy to demand centers. Since its privatization, KE has been working actively to develop its generation capacity alongside its downstream network to serve the Karachi area which is growing at a rapid pace. FMO and Proparco’s financing will support these efforts by allowing K-Electric to import more electricity from the national grid via development of new grids and transmission lines. Furthermore, the funding will be used to upgrade and refurbish existing transmission lines, allowing for better integration of renewables power (wind, solar) in the K-Electric grid.
In addition, a significant portion of the facility will be used to improve the distribution network. More specifically, the funds will be used to improve safety and make K-Electric’s distribution infrastructure more resistant to extreme weather and monsoons; to reduce electricity losses; and to support K-Electric’s investment in new connections in the face of Karachi’s continuous urbanization and influx of new residents and businesses.
Huub Cornelissen, Director Energy FMO, commented: “We are excited to have signed this secured 7-year term facility with K-Electric alongside our partner Proparco. This transaction — which brings our commitment within the Pakistani energy sector to over USD 200 mln — aligns perfectly with FMO’s Energy strategy. It enables K-Electric to onboard more renewable energy and contributes to SDG 8 in supporting decent work and economic growth, clearly highlighting FMO’s additionality in the sector.”
Muhammad Farrukh, Head of Treasury & Corporate Finance at KE, stated: “We appreciate FMO and Proparco for sharing KE’s commitment towards providing reliable power to the residents of Karachi. At KE we continue to invest in our infrastructure to support the evolving energy needs of our growing customer base. FMO and Proparco’s support will enable us to accelerate these efforts and enhance customer satisfaction as we progress into the future.”
Speaking about the breadth and depth of the investment plan, Chief Financial Officer KE, Muhammad Aamir Ghaziani stated that the utility is working on building value across its power chain through strategic investments. He added: “Our partnership with Proparco and FMO is also providing critical financing to build interconnections with the National Grid to bolster the supply of electricity to Pakistan’s largest city and economic hub. We are committed to making our systems safer and resilient, and as a forward-looking utility, our ambition is to add 1100 MW of renewable energy into our mix by FY30. The investment to ready our systems for this milestone begins today. We are thankful to FMO and Proparco for supporting KE in its mission to become the best utility in the country.”
Proparco is the private sector financing arm of Agence Française de Développement Group (AFD Group). It has been promoting sustainable economic, social and environmental development for over 40 years. Proparco provides funding and support to both businesses and financial institutions in Africa, Asia, Latin America and the Middle-East. Its action focuses on the key development sectors: infrastructure, mainly for renewable energies, agribusiness, financial institutions, health and education. For more information, please visit www.proparco.fr/en
K-Electric (KE) is a public listed company incorporated in Pakistan in 1913 as KESC. Privatized in 2005 KE is the only vertically integrated utility in Pakistan supplying electricity within a 6600 km2 territory including Karachi and its adjoining areas. The majority shares (66.4%) of the company are listed in the PSX owned by KES Power, a consortium of investors including Aljomaih Power Limited of Saudi Arabia, National Industries Group (Holding), Kuwait, and the Infrastructure and Growth Capital Fund (IGCF). The Government of Pakistan is also a minority shareholder (24.36%) in the company.