SBP asks banks to finance renewable power projects

KARACHI: The State Bank of Pakistan has introduced financing facility for establishment of new power projects using renewable energy with a capacity of up to 10MW with a view to meeting the growing electricity demand of the country.

According to a Circular issued here on Tuesday, sponsors of power projects can avail financing facility through banks/DFIs for new imported and locally manufactured plant, machinery and equipment. Preference shall be given to projects being established in the less developed areas of the country, it said.

As per eligibility criteria laid down in the circular, financing will be available to the prospective sponsors desirous of setting up of power projects with a capacity of up-to 10MW, who have completed prescribed requirements of Alternative Energy Development Board (AEDB), the concerned regulatory authority and other relevant Government Department/ Authority, in compliance with the prevalent Renewable Energy Policy of the Government of Pakistan.

It said the financing shall be available only for establishing new power plants of up-to 10MW installed capacity using alternative/renewable energy sources (wind, hydel, biogas, bio-fuels, bagasse cogeneration, solar power and geothermal as fuel). However, financing will be available for LCs established for import/purchase of new plant, machinery & equipment from December 1, 2009 to June 30, 2012 only.

Refinance may be provided up-to 100 percent of financing provided by banks/DFIs to the eligible borrowers for the import/local purchase of plant, machinery & equipment subject to adherence of other rules & regulations, the circular said.

Under the Scheme, financing will be available for a maximum period of ten years including a maximum grace period of 2 years. The grace period will be over and above the Availability Period of one year. However, maximum period of financing shall not exceed the period of ten years (including grace and availability period), from the date of first disbursement, it added. According to the Circular, the rate of service charge at which SBP will provide refinance to the Banks/DFIs shall be determined on the basis of average of weighted average yields of last two auctions of 5 and 10 years PIBs.

It said the service charges shall be announced for each fiscal year and shall remain valid for a period of one year from 1st July to 30th June....LINK