Laraib Energy

completed

IFC is proposing an investment in Laraib Energy Limited (“LEL”, the “Company”), which will develop and operate 84 MW run-of-river hydroelectric power generating complex known as the New Bong Escape Hydroelectric Power Complex (the “Project”) on the Jhelum River in Azad Jammu and Kashmir (AJ&K), Pakistan. The Company is 75% owned by the Hub Power Company Limited (HUBCO), which owns and operates the first thermal power Independent Power Producer plant (the 1,292 MW Hub Power Station) in Pakistan, supported by the World Bank in 1990s. The Jhelum River is classified as an International Waterway and governed by The Indus Waters Treaty of 1960. In accordance with IFC’s Policy on Social and Environmental Sustainability (April 30, 2006), IFC, on February 17, 2009 sent riparian notices to the IFC Executive Directors for both, India and Pakistan notifying them of IFC’s proposed investment in the Project and its location in AJ&K, the Pakistan-administered portion of an area over which India and Pakistan have been in dispute since 1947. By supporting the project, IFC does not intend to make any judgment on the legal or other status of any disputed territories or to prejudice the final determination of the parties'' claims. No objections have been received by either of the Executive Directors for India and Pakistan.All project works are located in the flood plain of the Jhelum River approximately 7 km downstream of the Mangla Dam, a major multi-purpose water storage project commissioned in 1967, and adjacent to irrigation works that were completed in 1910 (the Bong and Upper Jhelum canals). The Project will not involve the construction of a dam or reservoir nor will it affect existing water management regimes. It will withdraw water released from the existing Mangla Dam and return that water to the main stem of the Jhelum River through a 7.5 km tailrace constructed in a sub-channel of the Jhelum. Water release from the Mangla Dam is managed by the Indus River System Authority. As a run-of-river project, the Project is not expected to affect upstream or downstream hydrology of the Jhelum River and is unlikely to cause any significant, lasting environmental and social impacts. The Project includes an in-out connecting arrangement with the double circuit 132 kVA Mangla/Kharian transmission line, which passes over the project site. No right-of-way acquisition is needed since connection facility will be built within the project site. The Project will use the water being discharged from the upstream existing hydropower plant (1,000 MW Mangla Hydroelectric Power Station) located at Mangla Dam. The Mangla Dam is being raised by the national Water and Power Development Authority (WAPDA) to increase storage capacity (“Mangla Dam Raise Project”). The Mangla Dam Raise Project will provide better regulated water to the Project, however, both projects are not mutually dependent, and therefore, the Mangla Dam Raise Project has not been considered an associated facility to the Project.The Project was registered as a Clean Development Mechanism (CDM) project by CDM Executive Board under the United Nations Framework Convention on Climate Change on January 31, 2009. The Asian Development Bank (ADB), the Islamic Development Bank and two local commercial banks (National Bank of Pakistan and Habib Bank Limited) approved financing to the Project in 2007. At the request of the Company, IFC and Proparco (Société de Promotion et de Participation pour la Coopération Economique) are planning to provide additional financing to support the Project. The Project will be Pakistan’s first IPP project in the hydropower sector. Through its development of the Project, LEL has broken the ground and established a framework that is expected to be replicated for future hydro IPP projects in Pakistan.The Company has conducted updated environmental and social assessment to demonstrate that the Project is being designed in accordance with the IFC’s Performance Standards on Social and Environmental Sustainability (April 30, 2006).