LAHORE: The Water and Power Development Authority (Wapda) has postponed its plan of floating another green Eurobond to raise $500 million by March next year keeping in view various internal and external factors causing increase in interest rates.

The authority now plans to launch the bond in next fiscal year (2022-23) subject to suitability of the situation, Dawn has learnt.

“The local and international situation, especially in the wake of current situation in Afghanistan, has turned the overall environment as not feasible to raise funds by launching bonds in the international market as this has led to over-pricing or increasing interest rates on Eurobonds meant for raising funds for the projects,” Wapda’s Member Finance Naveed Asghar told Dawn on Tuesday.

Decision taken in view of rising interest rates on Eurobonds

The authority on May 27 launched its first Eurobond namely Indus bond for a period of 10 years to raise $500m at a competitive interest rate of about 7.5pc after it listed it on the London Stock Exchange on May 24. The launch of the bond attracted a number of international investors who offered Wapda investments worth $3bn, six times more than its need through the Indus bond that was later launched by Prime Minister Imran Khan on May 31 in a ceremony held in Islamabad. Of the $2.2bn required in next five years ($1.1bn in the first two years) for the construction of the mega Diamer Basha and Mohmand dams, the authority successfully raised $500m through the Indus bond under a plan to raise more funds through bonds in future based on its financial needs.

The official said that the country’s political situation, IMF programme, widening current account deficit, increasing inflation and falling rupee and other issues including situation in Afghanistan have also caused increase in the interest rates on Eurobonds, specifically related to Pakistan.

“At present, the interest rate has crossed 8pc and is going up gradually. Therefore, it is better for us not to launch another bond to raise $500m this fiscal year under a medium- or long-term note programme. Moreover, the funds we currently have are sufficient to meet our expense on the projects during this fiscal year,” the Wapda member explained.

Wapda’s first 10-year dollar-denominated green bond had been launched at a competitive price of 7.5pc, which, according to the authority was unprecedented given Pakistan’s sovereign bond maturing in 2031 has a coupon of 7.375pc. “We intend to go to the market again next year for another green eurobond issuance in line with our capital expenditure needs.Wapda has a doversified financing strtaegy approved by the government and would be employing multiple avenues including eurobond, export credit agemcies and Sukuks,” Mr Asghar maintained.

Published in Dawn, September 29th, 2021