A new subsidiary of Chinese state-run energy giant China Three Gorges Corp is seeking financing for $7 billion in energy projects in Pakistan and has started work at the site of the first project, its chairman told Reuters on Monday.
The new company, the Hong Kong-based China Three Gorges South Asia Ltd, began construction at the site of the long-planned 720 MW Karot hydropower project during the visit of Chinese President Xi Jinping this month.
The project is part of a $46 billion infrastructure and energy package that Xi announced to strengthen Pakistan’s sluggish economy and tackle severe electricity shortages.
The package will give China access to Asian markets and Pakistan’s deepwater Gwadar port.
Financing has yet to be finalised for many of the projects Xi announced.
About 80 percent of the estimated $1.7 billion cost of Karot is close to being finalized, Wang Shaofeng told Reuters in an interview.
Most financing would come from the Export-Import Bank of China and the China Development Bank, he said.
The International Finance Corporation, the private investment arm of the World Bank, bought a 15 percent stake in the new company for $125 million, an investment matched by China’s new $40 billion Silk Road infrastructure fund.
“We are hoping to bring onboard investors from the United States and Middle East shortly,” Wang said. “Sovereign funds are interested. We are also looking at boosting cash flow through acquisitions. Eventually, we hope to list on the stock market.”
The company’s biggest projects will be a series of four large hydropower plants on the Jhelum river, running through the eastern province of Punjab. The plants will be operated by the company for 20 years and then handed over to Pakistan.
Karot will take about five years to complete, Wang said, and the company hoped to close its financing by October.
The company is negotiating with Pakistani energy regulators about the final price of the electricity it will produce.
Pakistan’s energy market is heavily regulated and investors complain that they are often left out of pocket because it is very slow to adjust tariffs to international price fluctuations.
The government is also often late paying subsidies to power producers, leaving them without cash to buy fuel.
