Circular No. 19 of 2009
December 01, 2009
for Financing Power Plants Using Renewable Energy
With a view to meet the growing electricity demand and
to promote renewable energy projects in the country it
has been decided to provide financing for establishment
of new Power Projects Using Renewable Energy with
a capacity of up-to 10 MW. Sponsors of power
projects can avail financing facility through banks/DFIs
for new imported and locally manufactured plant, machinery
and equipment. Preference shall be given to projects being
established in the less developed areas of the country.
i) Financing shall be available to the prospective sponsors
desirous of setting up of Power Projects with a capacity
of up-to 10 MW, who have completed prescribed requirements
of Alternative Energy Development Board (AEDB), the concerned
regulatory authority and other relevant Government Department
/ Authority, in compliance with the prevalent Renewable
Energy Policy of the Government of Pakistan.
ii) Financing shall be available only for establishing
new Power Plants of up-to 10 MW installed capacity using
alternative / renewable energy sources (wind, hydel, biogas,
biofuels, bagasse cogeneration, solar power and geothermal
iii) Financing shall be available for purchase of new
imported and locally manufactured plant, machinery and
iv) Financing shall be available for LCs established for
import/purchase of new plant, machinery & equipment
from the date of issuance of this circular and up-to June 30, 2012 only.
v) Refinance may be provided up-to 100% of financing provided
by banks/DFIs to the eligible borrowers for the import/
local purchase of plant, machinery & equipment subject
to adherence of other rules & regulations.
3. Availability of Funds:
i) Financing under the Scheme shall be provided by the
banks/DFIs on first come first served basis within the
overall amount earmarked for the purpose. While adequate
funds have been earmarked for the Scheme under reference
the banks/DFIs shall, however, be required to approach
SME Finance Department, State Bank of Pakistan, after
their internal approval of financing to each project for
confirming the availability of funds. State Bank will
immediately respond to the concerned bank/DFI with a copy
to the concerned office of the SBP BSC (Bank) from where
it will avail refinance. In case banks/DFIs have not disbursed
1st installment / opened LC / made firm contract with
down payment, the confirmation / approval of availability
of funds from SBP should lapse within a period of three
ii) SBP’s prior confirmation will be given for the
entire funding to a project under the Scheme.
iii) In case of depreciation of PKR at the time of retirement
of LC(s), SBP shall not consider the request(s) of bank(s)/DFI(s)
to enhance the amount of funding of the project. Therefore,
the risk of enhanced financing requirements would either
be borne by the borrower or by the bank on same terms
upon which refinance has been obtained.
iv) “Availability Period” for individual project;
where funds are to be provided on staggered basis, banks/DFIs
can disburse loan amounts during a maximum period of one
year, from the date of first disbursement. Any undrawn
portion from approved amount shall lapse at the end of
the said period.
4. Period of Financing and Grace Period:
Financing under the Scheme shall be available for a maximum
period of ten years including a maximum grace period of
2 years. The grace period will be over and above the Availability
Period of one year. However, maximum period of financing
shall not exceed the period of ten years (including grace
and availability period), from the date of first disbursement.
The banks / DFIs shall clearly mention the “availability
period” and “grace period” in the repayment
schedule to be submitted to the concerned office of SBP-BSC
(Bank) at the time of availing refinance.
5. Rates of Service Charges / Mark up:
i) The rate of service charge at which SBP will provide
refinance to the Banks/DFIs shall be determined on the
basis of average of weighted average yields of last two
auctions of 5 and 10 years PIBs.
ii) The service charges shall be announced for each fiscal
year and shall remain valid for a period of one year from
1st July to 30th June.
iii) For the current fiscal year the service charges and
rates for end users have been fixed as per the following:-
5 years and up-to 10 years
iv) The rate of service charges once fixed shall remain
locked-in for the entire duration of the loan, provided
the borrowers continue to repay on due dates as per repayment
schedule. Similarly, in cases where the loan amount has
not been disbursed in full during the validity of an applicable
rate, the un-disbursed amount shall attract the new rate
of finance/refinance applicable on the date of its disbursement
by the Bank/DFI.
Financing facilities under the Scheme shall be provided
through all commercial banks and Development Finance Institutions
7. Grant of Refinance:
i) The State Bank shall provide refinance to each bank/DFI
on service charge (mark-up) basis in terms of Section
17 (2) (d) read with section 22 of State Bank of Pakistan
ii) Refinance shall be allowed to the Banks/DFIs by the
concerned office(s) of SBP BSC (Bank) on submission of
documents as may be required by State Bank. The documents
initially required are attached herewith.
8. Repayment of the loans:
i) Principal amount of loans shall be repayable in equal
quarterly / half yearly installments after prescribed
grace period, if any. However, if a borrower will repay
the loan amount or its installment, in part or in full,
before the due date(s), the banks/DFIs shall be under
obligation to repay the amount(s) so received within three
working days to the concerned office of SBP-BSC (Bank)
failing which fine for late adjustment of loan will be
recovered from the concerned bank/DFI, at the rate specified
by the State Bank.
ii) The refinance granted by SBP-BSC offices to the Banks/DFIs
shall be recovered on the due dates as reported in the
original repayment schedule from the account of the banks/DFIs
maintained with the respective office of the SBP BSC (Bank).
In case the borrowers fail to make repayment of the amount
of installment as per the original repayment schedule,
the bank/DFI will be entitled to charge normal rate of
mark up on such overdue principal amount besides taking
other actions to recover the same as are incidental to
such defaults. In no case the liability of banks/DFIs
to pay/repay to SBP BSC the principal amount of refinance,
or mark up or any other charges or penalty thereon shall
be dependent upon the recovery from the borrower nor shall
such liability be affected by any default on the part
of the borrower.
iii) Mark-up shall be paid on quarterly basis.
9. Other Terms & Conditions:-
Financing under the Scheme shall be subject to compliance
with all rules and regulations including Prudential
Regulations for Corporate/ Commercial Banking.
ii) Banks/DFIs shall not take more than three months
in evaluating an application for financing under the
Scheme from the date of receipt of complete information
from the borrower. Where the request is declined, the
bank/DFI will explicitly apprise the reasons for rejecting
the application to the prospective borrower.
iii) There will be no maximum limit for borrowing by
the prospective sponsors under this Scheme. However,
in case of larger financing requirements, i.e. over
Rs 500 million, banks/DFIs are encouraged to provide
finance under consortium arrangements.
iv) Financing banks/DFIs shall ensure fulfillment of
requisite pre-disbursement formalities by the borrower
through due diligence as per their own internal arrangements
to avoid malpractices and mis-utilization of funds under
v) Besides applying due diligence process as per their
lending policies, standard / appropriate procedures
in power project financing, banks/DFIs may also impose
any specific condition(s), considered appropriate by
them in such type of transactions, while sanctioning
loan under the Scheme to protect their interests.
vi) Moreover, banks/DFIs may also ensure that firm commitments
for the portion of funding not to be financed by SBP
(in the form equity, conventional bank finance etc.)
are available for the project being financed by them
under the Scheme, so that the project does not eventually
suffer due to any funding gap. Firm equity commitment
from the sponsors may be made in the form which is satisfactory
for the financing bank/DFI. The State Bank would, however,
not insist on fulfillment of this condition by a specified
mode but would let the bank/DFI to satisfy itself in
vii) Captive power projects which have already availed
financing facilities under LTFF Scheme shall not be
eligible for financing under this Scheme.
viii) Fixed term loans which have been extended prior
to the announcement of this Scheme shall not be eligible
ix) Banks/DFIs shall consider financing based on the
debt to equity requirements as prescribed in Prudential
Regulations for Corporate/ Commercial Banking. The financing
bank/DFI may, however, ask for higher contribution of
equity from the borrowers keeping in view individual
x) Refinance shall be provided on the basis of certification
by the Internal Audit of financing bank/DFI with regard
to confirmation that the loan is within the terms and
conditions laid down in the Scheme. A copy of the said
Internal Audit Certificate shall also be submitted to
the concerned office of SBP BSC (Bank) at the time of
availing the refinance facility.
xi) Financing under the Scheme shall be checked/verified
by our Banking Inspection Department (BID) during inspection
of the banks/DFIs to ensure that the same have been
allowed as per the terms and conditions of the Scheme.
xii) Financing shall not be available for the purpose
of acquisition of land, construction of building etc.
xiii) Financing shall be available to the extent of
C&F Value/ex-factory/showroom price of the new imported
or locally manufactured plant, machinery and equipments.
xiv) Advance payment to the extent of 20% of the C&F
value/ex-factory /showroom price of imported or locally
manufactured machinery can be made in terms of related
underlying agreement by securing the bank’s interest.
In case of imported machinery, advance payment will
be subject to compliance with the terms & conditions
prescribed in FE Manual and instructions issued from
time to time by our Exchange Policy Department in this
xv) Second-hand machinery shall not be eligible under
xvi) Disbursements by banks/DFIs should not be made
to the borrower directly; instead payments shall be
made to the manufacturers / suppliers of the machinery.
xvii) Where a bank/DFI considers the requests of their
borrowers for rescheduling of loans granted under the
Scheme, the principal amount of refinance shall only
be rescheduled in a way that total tenor of refinancing
under the scheme does not exceed maximum period of 10
years from the date of original disbursement made by
the banks/DFIs. Further, the borrower shall be liable
to make payment of mark-up at the rate applicable on
the date of such rescheduling, or the original rate
whichever is high.
xviii) The sponsors of the project shall be under obligation
to ensure that the benefits of the concessionary finance
earned through the scheme are passed on to the consumers
in terms of competitive rates.
i) In case of violation of the terms & conditions
of the Scheme, the SBP shall reserve the right to recover
the amount of refinance granted to the bank/DFI along-with
fine at the rate of Paisa 60 per day per Rs 1000/- or
ii) In case, a borrower will make early repayment(s) of
the amount of loan/installment(s) and bank/DFI fails to
repay the same to concerned office of SBP-BSC within three
working as mentioned in clause 8(i) above, late adjustment
fine will be charged from the concerned bank/DFI at the
rate of Paisa 60 per day per Rs 1,000 or part thereof.
(Mansoor H. Siddiqui)