In a landmark emerging market ECA-supported deal, Pakistan’s Northern Power Generation Company (NPGCL) closed US$250mn worth of Coface and Sinosure-backed facilities for the Nandipur power project.

BNP Paribas and HSBC were jointly mandated by NPGCL in June 2008 to arrange a total of US$250mn of ECA-supported facilities for the 450MW Nandipur project.

The ECA facilities consist of separate Coface (US$110mn) and Sinosure (US$140mn plus €6mn) facilities in support of the Chinese EPC contractor for the project (Dongfang Electric Company) and the gas turbine supplier (General Electric). The two facilities were signed in October 2008 and March 2009 respectively.

The Export Import Bank of China (as mandated lead arranger) joined BNP Paribas and HSBC in signing the credit facilities with NPGCL. CIC France also joined the consortium through a participation agreement with BNP Paribas.

Antoine Gustin, head of export finance Greater China at BNP Paribas, comments: “We are very proud of the involvement of the Export–Import Bank of China in this transaction. This is their first cooperation with a foreign bank for a Sinosure-covered loan and it paves the way for more deals. As agent, BNP Paribas’ close relationship with Sinosure was also a key element of the success of this transaction.”

The funds will be used to finance the construction of a combined cycle power project at Nandipur in Pakistan, estimated to cost US$329mn.

“This was a hugely important deal for Pakistan in providing long-term, competitively priced, offshore financing for much-needed new power generation capacity but at a time when financial market conditions deteriorated throughout 2008 and substantial uncertainty continued into early 2009,” says Simon Lee, director of export finance for the Middle East and North Africa at HSBC.

Pakistan is facing an energy deficit as demand for electricity has grown due to urbanisation and rapid industrial growth. Pakistan Electric Power Company (Pepco) estimates that demand will grow as much as 8.7% per year until 2011.

Commenting on the success of the deal, Régine Schapiro, head of unit energy, telecom and space, at Coface’s department of public guarantees, explains that the loan agreement stipulates that the environmental aspects of the project be monitored, “which is a very positive point in the field of combined cycle power plants”.

Whilst the borrower is ultimately 100% owned by the government of Pakistan and there is also a separate government of Pakistan ministry of finance guarantee, the deterioration in market conditions in the second half of 2008 created very significant challenges for the transaction.

It is a testament to the commitment of all of the banks in both of the ECA facilities and to the leadership of both BNP Paribas and HSBC that the financing was successfully concluded despite the higher risk profile of Pakistan.

“Despite the unprecedented challenges, HSBC and BNP Paribas were able to keep the bank group intact and signature of the last ECA facility took place in March 2009. HSBC’s substantial presence in Pakistan again demonstrated the importance of having local personnel in helping to close such a transaction,” HSBC’s Lee says.

“The successful approach to the ECAs has placed the government of Pakistan in a robust position to avail itself of further similar facilities in the future,” he adds.
Deal information




Borrower: Northern Power Generation Company (NPGCL)
Amount: US$250mn
Initial mandated lead arrangers: BNP Paribas, HSBC
Mandated lead arranger: China Exim
Additional lending participant: CIC
ECAs: Sinosure, Coface
Law firms: Norton Rose, Org Dignam
Tenor: Sinosure loan – 13 years door-to-door (3 years drawdown and 10 years repayment); Coface loan – 15 years door-to-door (3 years drawdown and 12 years repayment)
Date signed: Sinosure loan – March 19, 2009; Coface loan – October 2008