PROJECT PROPOSAL OUTLINE

Project topic
Project Financing by Independent Power Producer.
Introduction to Organization:
Star Hydro Power Limited (SHPL) is an Independent Power Producer (IPP). It is setting up the
147 MW run-of-river Patrind Hydropower Project on river Kunhar near the village of Patrind,
District Muzaffarabad of Azad Jammu & Kashmir (AJ&K). The project is being developed under
the Government of Pakistan's Policy for Power Generation Projects, 2002 on BOOT basis with a
concession period of 30 years.
SHPL was incorporated in April 2006 as a public limited company to develop and implement the
project. Korea Water Resource Corporation (K-water) and Daewoo Engineering & Construction
Company are the sponsors of SHPL, having acquired 100% shareholding in the
company through their special purpose Singapore based investment vehicle, KDS Hydro.
Project Rational
Power generation is a growth area, particularly in the developing countries, where the pace of
economic expansion is being slowed by a shortage of available electricity. Often, local
governments do not have the necessary capital to build required Power Stations and, therefore,
look to foreign developers to provide financing and expertise.
Power production units requires huge investment, therefore the individual investor hesitate to
invest the whole investment due to high credit risk. So the production unit is financed through
project financing (non-recourse financing) which means thats projects future cash flows are
used to pay back the amount of loan. When loans are obtained from lenders through project
financing, they set complex requirements to secure their amount, which are in majority difficult
for the independent power producers to fulfill. This has discouraged foreign investment from
flowing into the power sector of Pakistan.
Project Purpose
The purpose of this project is to encourage the private independent power producers to invest
in the defective power sector of Pakistan. By analyzing the complex requirements set by the
lenders, coming up with a solution that will facilitate the independent power producers to
successfully fulfill the lenders provisions and obtain the required amount of financing from
lenders.


Project Goal
To attract the direct foreign investment in power sector to overcome the huge demand-supply
gap. To ease the independent power producers by examining the strategies adopted by the Star
Hydro Pvt. Ltd to satisfy the lenders provisions.
The project goal will be achieved by providing a comprehensive financial plan to Independent
Power Producers for their financial closing.
Statement of Scope
Critically analyze the lenders provisions under project financing and providing the independent
power producers with the best possible solution for fulfilling the complex requirements of
lenders.
Project Objectives
Identify the financial issues faced by independent power producers to get required
amount of finance from lenders.
Provide effective strategies to overcome the financial hurdles in power project financial
closing.
Lenders mostly hesitate to invest in power projects due to high credit risk, through this
project we ensure them that this sector is secure and high return able.
Anticipated Benefits
If the projects finding implemented then the following benefits can be expected.
Direct foreign investment will be increased because mostly international banks show
their keen interest in this type of project.
Lenders will fully satisfy about their credit risk and will invest in power projects. (core
purpose is to facilitate the lenders and sponsors and make them known that this sector
has more potential in terms of return).
After the penetration of direct foreign investment in power sector, the industry will
flourish and ultimately helps to reduce the energy crisis in Pakistan.
Foreign direct investment helps in growth of any country; this will increase the
employment opportunities and living standards of people.
The Independent Power Producers will achieve their financial closing in effective way.