The New Bong Hydro Project finally reached financial close on December 29, 2009, five years after years after Shearman & Sterling was first appointed to advise the lenders, namely, the Asian Development Bank, IFC (International Finance Corporation, part of the World Bank), PROPARCO (a French development finance institution), Islamic Development Bank, and two domestic banks (Habib Bank Limited and National Bank of Pakistan). The financing is intended for the development, construction and operation of a run-of-the-river hydroelectric power project located in Azad Jammu & Kashmir. The electricity will be sold into Pakistan under a 25-year Power Purchase Agreement. The project will be implemented pursuant to an Implementation Agreement with the Government of Pakistan and a separate Implementation Agreement with the Government of AJK.
The US$175 million multi-sourced financing, which comprises US$ debt from ADB, IFC and PROPARCO, a Shariah compliant ijara lease facility from IDB, and a Rupee mark-up facility from the Pakistan commercial banks, signed on 5 November 2009.
Partner Bill McCormack (Singapore-Project Development & Finance) led the Shearman & Sterling team, working with associates Rachel Borrill (Singapore-Project Development & Finance), Scott Baggett (Singapore-Project Development & Finance), Matthew Blycha (Singapore-Project Development & Finance), Jayne Mander (Singapore-Project Development & Finance), Anna Fingerit (Singapore-Project Development & Finance) and Philip Stopford (Abu Dhabi-Project Development & Finance).
Said McCormack, "This is the first project financing of any kind in Azad Jammu & Kashmir and is a considerable achievement given the complexity and political and other risks involved. The cross-border nature of the project created a number of issues. Likewise, the financing structure and intercreditor arrangements were particularly complicated as a result of the multiple sources of finance and the inclusion of the Islamic-compliant ijara-lease structure provided by the Islamic Development Bank. Congratulations and thanks to everyone on the team who worked so hard for so long to get this deal to financial close.”