Bank of China contributes to $157.1 million syndicated loan for Karachi TP-1000 Transmission Enhancement Project (Linked to Record ID#100867)

Project narrative

On December 22, 2015, K-Electric Limited signed a $91.5 million syndicated facility (loan) agreement with a group of Chinese and non-Chinese banks for the Karachi TP-1000 Transmission Enhancement Project (TP 1000-03). It was subsequently upsized to $157.1 million. Participants in the loan syndicate included Bank of China (BoC), the Industrial and Commercial Bank of China (ICBC), and Standard Chartered Bank (UK). The loan originally carried the following borrowing terms: a 3.25 grace period, a 10.25 maturity, and an annual interest rate of 3-month LIBOR plus a 3.5% margin. However, as of July 1, 2023, the loan's interest rate was reset to 3-month SOFR plus a 0.26161% credit adjustment spread (CAS) and a 3.5% margin. The borrower (K-Electric Limited) purchased a Sinosure credit insurance policy. It also executed cross-currency swaps with a set of commercial banks to hedge its foreign currency principal payment obligations under the Sinosure-backed facility. The borrower was expected to repay the loan in 28 quarterly installments between March 16, 2019 and December 16, 2025. Record ID#96265 captures the estimated financial commitment of Bank of China, while Record ID#100867 captures the estimated financial commitment of ICBC. The purpose of the project was to support a new 220kV and 132kV electricity transmission network in Karachi, including an expansion plan for 21 existing grid stations (including those in the Federal ‘A’ Area, Federal ‘B’ Area, Surjani, North Karachi, Liaquatabad, Valika, KDA, Defence, Gharo, Surjani, Jacob-Line, Landhi, Orangi, Jauhar, Malir, Old Town & Hub), 30 power transformers and more than 400 new 11 kV feeders to cater the grid growth, and a Disaster Recovery Centre for emergencies. Upon completion, the project was expected to result in enhanced power supply reliability and stability for areas of Gulshan-e-Iqbal, Gulistan-e-Johar, surroundings of Jail road, Azizabad and Civic Centre. The Disaster Recovery Center was expected to help cope with emergency situations by reducing the fault ratio and increasing the reliability and supply of electricity. Shanghai Electric Group Co., Ltd. was the EPC contractor responsible for project implementation. The project commenced on December 14, 2015. However, it faced various implementation delays related to due to scope of work revisions in line with operational and revised load requirements (including changes in the short circuit level of new 220kV grids and transmission lines and conversion of 132kV new grid station into GIS from AIS) and significant Right of Way (RoW) issues. As of December 2019, the project had achieved a 94% completion rate and the following milestones: five new grid stations consisting of 2x 220kV and 3x 132kV grids had been added; twenty-five new power transformers had been added in the system out of which six had been energized at new grids, whereas the remaining nineteen had been installed at existing grids (including replacement of four transformers; one auto transformer had been energized at a new grid whereas three had been installed at an existing grid; 28x 220kV bays and 47x 132kV bays had been added; a 6.04 km net addition in length of 220/132kV transmission circuits was achieved; rehabilitation of around 39 km of 220/132 kV lines had taken place; 432 MV new switchgears had been added; old GIS at SGTPS with new thirteen GIS bays had been replaced; and a state of the art Disaster Recovery Centre (DRC) facility had been commissioned to serve as a backup for the KEL Load Dispatch Centre (LDC).