ADB to invest $2 billion in Pakistan’s energy sector

In this file photo, pedestrians walk past a logo of the Asian Development Bank (ADB) displayed outside its headquarters in Manila on Sept. 2, 2010. (AFP)
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Updated 12 December 2019

ADB to invest $2 billion in Pakistan’s energy sector

  • Pakistan’s energy sector is facing a cash shortfall of Rs12 billion per month, down from Rs39 billion
  • ADB is interested in facilitating technical studies for gas storage facilities

KARACHI: The Asian Development Bank (ADB) plans to invest $2 billion in Pakistan’s energy sector within the next three years, as the South Asian nation’s power supply chain is paralyzed by Rs12 billion a month in circular debt, the Ministry of Energy said in a statement.
After a Wednesday meeting with Energy Minister Omar Ayub Khan and Special Assistant to the Prime Minister on Petroleum Nadeem Babar, the ADB’s team, headed by its director for Central and West Asia, Werner Liepach, also expressed interest in facilitating technical studies for gas storage, as Pakistan is facing a gas deficit.
The Asian lender this week released $1 billion to shore up Pakistan’s public finances and help strengthen its slowing economy, while another $300 million were released to help the government address financial sustainability, governance, and energy infrastructure policy constraints in the energy sector.
In July, the International Monetary Fund (IMF) approved a three-year $6 billion extended fund facility (EFF) to finance the government’s economic reform program that aims to put Pakistan’s economy on the path of sustainable and inclusive growth. The bailout program is expected to catalyze at least $38 billion in financing from Pakistan’s development partners.
The ADB, Pakistan’s top energy sector partner with a $2.1 billion portfolio discussed energy sector projects with the ministry’s Power Division, and it was decided that a comprehensive portfolio review meeting will be held by the end of this month.
The ADB team was apprised of the New Renewable Energy Policy, which will be placed before Pakistan’s Council of Common Interest (CCI) in its scheduled meeting by the end of the month. The team was briefed on various steps that have been undertaken to boost the efficiency of the system and campaign against power theft, the ministry’s statement said, adding that the government’s circular debt capping plan has reduced the debt’s growth from Rs39 billion a month to Rs12 billion. 
On Dec. 6, Liepach observed that Pakistan’s “is a longstanding chronic issue ailing the country’s power sector.”
“A comprehensive and realistic Circular Debt Reduction Plan, assisted by ADB in close coordination with other development partners, is the cornerstone of this subprogram. The plan aims to drastically cut the new flows of circular debt and provides policy directions on addressing accumulated circular debt,” he said.


Bailout will keep Air France-KLM afloat for less than year: CEO

Updated 21 September 2020

Bailout will keep Air France-KLM afloat for less than year: CEO

  • ‘If we base it upon the past few weeks, it is clear that the recovery in traffic will be slower than expected’
  • Governments are coming under pressure to tie airline bailouts to environmental commitments

PARIS: Bailouts provided to Air France-KLM by the French and Dutch governments will keep the airline flying less than a year, its CEO Benjamin Smith said Monday and evoked the possibility of injecting new capital.
In an interview with the French daily l’Opinion, Smith also warned that calls for airlines to contribute more to fight climate change could be catastrophic for their survival which is already under threat due to the coronavirus pandemic.
When countries imposed lockdowns earlier this year to stem the spread of the coronavirus airlines faced steep drops in revenue that have claimed several carriers.
A number of countries stepped in with support, including France which provided $8.2 billion to Air France and the Netherlands which received a $2.9 billion package.
“This support will permit us to hold on less than 12 months,” said Smith.
The reason is that air traffic is picking up very slowly as many northern hemisphere countries are now fearing a second wave of infections.
“If we base it upon the past few weeks, it is clear that the recovery in traffic will be slower than expected,” according to Smith, who said when the bailout was put together the airline was expecting a return to 2019 levels only in 2024.
Smith said discussions were already underway with shareholders on shoring up the airline group, and steps would be taken before the next regular annual meeting in the second quarter of next year.
“One, three or five billion euros? It is too early to put a figure on a possible recapitalization,” he said.
The airline group had $12.12 billion in cash or available under credit lines.
Major shareholders include the French government with a 14.3 percent stake, the Dutch government at 14 percent, as well as Delta and China Eastern airlines which each hold an 8 percent stake.
Governments are coming under pressure to tie airline bailouts to environmental commitments.
One proposal that has come from a citizen’s convention convoked by President Emmanuel Macron would cost airlines an estimated $3.6 billion.
Smith said the imposition of environmental charges on the industry would be “irresponsible and catastrophic” for Air France-KLM.