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To support the Government's Renewable Energy Development Sector Investment Program (REDSIP) being implemented by the Alternative Energy Development Board (AEDB), the Government has requested and the Asian Development Bank (ADB) has agreed to provide in aggregate up to $200 million equivalent in guarantees to help mobilize commercial debt from domestic and/or international lenders needed to finance wind and other renewable energy power plants (RE Projects), which would otherwise be too costly or simply not available due to current market concern about ‘off-take’ risks associated with the power sector in Pakistan.

 

 In its support of the Government’s effort to further develop Pakistan’s renewable energy sector, ADB seeks to maximize the leverage of its own capacity by optimizing the debt composition of each RE Project. Therefore, it is recommend that RE Project sponsors and their commercial lending partners pursue in parallel complimentary sources of debt financing, including financing supported by export credit agencies and/or multilateral or bilateral developmental institutions. In doing so, ADB anticipates that its guarantee support under the REDSIP Guarantee Facility can be made available to local and/or international commercial lenders, thereby filling financing gaps in support of as many as possible RE Projects.

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Application Process

Under the REDSIP Guarantee Facility, the aggregate value of guarantees issued is limited to the equivalent of $200 million, acceptance of applications is restricted to a limited period of time, and an application and selection process will apply. This is to ensure that support is available to 'shovel ready’ RE Projects which can move forward quickly, subject only to the availability of commercial debt. As such there will be a two step application process.

Step 1, Preliminary Application

The period for which Preliminary Applications will be accepted has been extended retroactively from April 30, 2011 to March 31, 2012.Accordingly AEDB will immediately review Preliminary Applications thatwere previously submitted after the April 30, 2011 deadline and make arecommendation to ADB as to whether the proposed RE Project seems eligiblefor support under the REDSIP Guarantee Facility. If ADB and AEDB agreethat the RE Project is eligible for support under the REDSIP GuaranteeFacility, AEDB will send the applicant a Notice of Registration (NOR) confirmingthis by November 21, 2011. If, however, AEDB and ADB consider the RE Projectto be ineligible for support, AEDB will notify the applicant accordingly

AEDB will be accepting Preliminary Applications from RE Project sponsors (or their authorized agents) that: (i) have a valid Letter of Intent (LOI) from AEDB; (ii) have an IPP site allocation endorsed by AEDB; and (iii) is expected to meet the Eligibility Criteria. Preliminary Applications should be submitted in PDF format by email to:

Mujahid Sadiq
DG International Cooperation
Alternative Energy Development Board
Government of Pakistan 
Email: mujahid@aedb.org 

with an email copy sent to:

Mohammed Azim Hashimi
Senior Investment Officer
Pakistan Resident Mission
Asian Development Bank
Email: mhashimi@adb.org

AEDB will review each Preliminary Application and make a recommendation to ADB as to whether the proposed RE Project seems eligible for support under the REDSIP Guarantee Facility. If ADB and AEDB agree that the RE Project is eligible for support under the REDSIP Guarantee Facility, AEDB will send the applicant a Notice of Registration (NOR) confirming this within 45 calendar days of the date of receipt of the Preliminary Application. If, however, AEDB and ADB consider the RE Project to be ineligible for support, AEDB will notify the applicant accordingly.

Step 2, Guarantee Application

Attached to the NOR will be an ADB Guarantee Application form, which can be submitted by any prospective domestic or international bank or other reputable financial institution to ADB with a copy to AEDB (see above for contact details) after the RE Project has received a Letter of Support (LOS) from AEDB. The Guarantee Application will confirm that the applying financier(s) would in principle provide commercial loans to the RE Project subject to the provision of an ADB guarantee and the conclusion of acceptable financing documentation.

AEDB and ADB will review each Guarantee Application and AEDB will advise the applicant within 30 calendar days as to whether or not AEDB and ADB consider the RE Project to be ready and eligible for support under the REDSIP Guarantee Facility. If the RE Project is considered ready and likely to meet the Eligible Criteria by financial close, AEDB will send the applying financier(s) a confirmation that ADB will proceed with its detailed due diligence (DD Confirmation). The DD Confirmation will also indicate the amount of guarantee capacity notionally and indicatively allocated to the RE Project (subject to due diligence and the conclusion of satisfactory documentation), the due diligence requirements, documentation and approval process to be followed and the dates by which key project steps and financial close must be achieved. DD Confirmations will be issued to ready and eligible RE Projects on first-come-first-served basis.

Notwithstanding the issuance of any NOR or DD Confirmation, ADB may, at its sole discretion by notice in writing to the applying financier(s): (i) terminate its due diligence process and cancel the guarantee capacity allocated to the RE Project; or (ii) elect to extend the date by which under the terms of the NOR or DD Confirmation, any action or step in respect of the RE Project (including financial close) must be completed.

Any allocated guarantee capacity will require a processing fee in the form of a bank guarantee in the amount equivalent to $10,000 to be issued by the applying financier(s) for the benefit of AEDB. However, AEDB will release the bank guarantee if an ADB guarantee is not offered. An ADB guarantee will not be offered unless all Eligibility Criteria will have been met before financial close.

More Information
For more information, please contact either Mr. Mujahid Sadiq at mujahid@aedb.org or Mr. Hashimi at mhashimi@adb.org