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The major financing being arranged by a consortium of local banks

By SHABBIR H. KAZMI
 May 06 -12, 2002

The US$ 480 million White Oil Pipeline project of Pak-Arab Pipeline Company Limited (PAPCO) has achieved financial close. The entire debt of US$ 360 million including the local currency component will be arranged by the local commercial banks. The remaining US$ 120 million will be raised through equity. The nearly half a billion dollar project will initially comprise of 817 kilometer pipeline with a capacity to transport 8 million tonnes of POL products annually from Karachi to Mahmood Kot. PAPCO is a joint venture company led by Pak Arab Refinery Company (PARCO) with the three oil marketing companies operating in the country, Shell, Caltex and Pakistan Oil Company (PSO).

The total cost of the project is estimated at US$ 480 million or Rs 29 billion. Out of this US$ 120 million will be the equity. The debt component is US$ 360 million or Rs 22 billion in foreign exchange and Rs 12.5 billion in local currency. The project's major financing is being arranged by a consortium of local banks. These are National Bank of Pakistan (NBP), Habib Bank Limited (HBL) and United Bank Limited.

The NBP is also providing a foreign currency loan of US$ 18 million and issue bank guarantee of US$ 102 million for China Exim Bank related to suppliers' credit from China Petroleum Engineering and Construction Company (CPECC) which have been selected as EPC contractor for the project.

At the time of signing of the Memorandum of Understanding (MoU), Syed Ali Raza, President, NBP said, "This is truly significant and strategic infrastructure project for the country. To the consortium it represents a major opportunity to serve the country and play a role in the creation of a national asset by packaging the financing among ourselves as a home grown effort. We thank PARCO and PAPCO for reposing their full confidence in the ability of the local banks to arrange such mega financing which augurs well for development of the corporate debt market, investor comfort and overall business confidence." Also speaking on the occasion, Amar Zaffar Khan, President, UBL congratulated PARCO/PAPCO management on its vision for the country and professionally managing the packaging of the huge foreign exchange funding requirement of US$ 120 million for the project. Atif Bokhari representing President of HBL, expressed his organization's sense of great satisfaction on the progress of the project.

Accordingly, HBL, UBL and NBP, would arrange the entire local currency component. The three banks will jointly underwrite the availability of Rs 12.5 billion for PAPCO. Rs 10 billion would be floated as TFCs and remaining amount would be in the form of Redeemable Preferred Shares. The financing arrangements also include bridge financing of Rs 5 billion by the consortium to be made available for the project.

All necessary project expediting agreements between PAPCO and the EPC contractor are already in place. It may be recalled that all contracts and understandings had already been reached earlier, coinciding with the state visit of Zhu Rongji, the Prime Minister of China to Pakistan. CPECC has already mobilized in the country and about 80 Chinese pipeline specialists are busy in implementing the project.

HIGHLIGHTS OF THE PROJECT

* One kilometer pipeline of 30 inches diameter to connect FOTO oil jetty to PAPCO's terminal at Bin Qasim

* A 817 kilometer pipeline of 26 inches diameter from Bin Qasim terminal to Mahmood Kot

* Terminal and pumping station at Bin Qasim comprise of mainline pumps and six storage tanks with a total storage capacity of 162,000 tonnes

* Intermediate booster pumping station to be installed at a later stage at Bubak

* Pumping station and two storage tanks with a total storage capacity of 5,800 tonnes at Shikarpur

* Intermediate booster pumping station to be installed at a later stage at Fazilpur

* Terminal at Mahmood Kot with six storage tanks with a total storage capacity of 162,000 tonnes and connection to the OMCs at Gujrat and MFM pipeline system

* Fibre optic cable-based communication system

* PLC-based state-of-the-art SCADA system