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IP gas line to be financed via public-private partnership – Alfalah Securities Limited

Karachi: Iran-Pakistan (IP) gas pipeline project would be financed through public-private partnership (PPP) with a debt equity ratio of 70:30% with the government estimating that 100 km pipeline construction, from Iran border to Gwadar, would cost USD150 – 200 million.

According to Alfalah Securities Limited, for this purpose a ‘Special Purpose Vehicle PipeCo’ would be set up to arrange financing, implement construction, and earn gas transportation fee guaranteed from the government. The finance advisors for this project would be Industrial and Commercial Bank of China (ICBC) and Habib Bank (HBL) and Ernest Young Ford Rhodes Sidaat Hyder (EYFRS). The equity mix would be 40% by public sector enterprises (PSEs), 40% by private investment, and 20% through Initial Public Offering (IPO). The government would also raise revenue from imposition of gas infrastructure development cess for repayment of interest/mark-up due on bridge financing.

Inter- State Gas System (ISGS) would remain owner and manager of the gas pipeline project and investor in PipeCo would be offered sovereign bond yield plus 6% rate of return on their equity. The Pakistan Petroleum Limited (PPL), Pak Arab Refinery Limited (Parco), Employees Old-age Benefit Institution (EOBI) Government Holding Private Limited (GHPL), Oil and Gas Development Company Limited (OGDC) and National Bank of Pakistan were authorized to inject equity in the project through ISGS. The timeline for the issuance of IPO is not defined as yet however, Alfalah Securities Limited can expect the IPO to be issued in FY13 in order to raise funds to finance construction.

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