Naudero-I Rental Power Project

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In June 2009, the 51 MW, gas-fired Naudero-I Rental Power Project reached financial closure. The Government of Pakistan (GoP) chose rental power projects as its major strategic tool for closing Pakistan’s electricity demand-supply gap in the short term. Following its submission of an unsolicited proposal to the Private Power and Infrastructure Board (PPIB), Pakistan Power Resources (PPR) was awarded the contract. PPR was a joint venture between Walters Power International [United States] (35%) and Associated Group [Pakistan] (65%). On June 4, 2009, PPR and the designated state-owned power purchaser, Central Power Generation Company (GENCO-II), signed the rental services contract (RSC). Under the RSC, GENCO-II was to pay a rental charge of US$91.7 million, payable in arrears in 60 equal monthly installments to the sponsor. In line with the GoP's procurment process for rental power projects, the project sponsor submitted a payment guarantee to GENCO-II equal to 7% of the RSC’s value. In return, GENCO-II made a down payment to the sponsor equal to 14% of the RSC’s value. Thereafter, the GoP issued an annual renewable sovereign guarantee covering GENCO-II’s rental payments. On June 30, 2009, Walters Power International announced that a pair of Rolls Royce RB211 turbines was en route to Pakistan and that the funding for the project had been completed. Walters issued a notice to proceed on the plant. The sponsor’s estimated investment was US$20.1 million. To calculate this estimate, first the investment's present value (PV) was assumed by multiplying an assumed investment per kilowatt (US$600) by the plant’s installed capacity. The PV was then used to find an annual amortized payment, assuming 15 years as the expected asset life and a discount rate of 10%. This annuity payment was then multiplied by the term of the rental contract in years, giving the sponsor’s total estimated investment.