By Judith Ugwumadu | 17 February 2014

The Pakistan government has been granted a €100m long-term loan by the European Investment Bank to finance the construction of a renewable energy power plant.

A declaratory statement was signed today, by Nargis Sethi, secretary of Pakistan’s Economic Affairs division and EIB vice president Magdalena Alvarez. Sethi also invited the EIB to become involved with future energy efficiency projects.

The 128 MW Keyal Khwar Hydropower project is being constructed by the Water and Power Development Authority (WAPDA). It is estimated that the construction period will be four years starting from January 2013, the EIB noted.

Alvarez said: ‘The EIB is committed to supporting investment in renewable energy and helping countries around the world reduce carbon emissions. At the same time the EIB is pleased to be able to support Pakistan in this important sector, addressing the increased demand of energy in the country.

‘The investment will provide a clean and reliable supply of electric power contributing to climate change mitigation, which is a fundamental goal of the European Union.’

The project will feed the renewable energy into Pakistan’s national power grid, generating significant economic benefits.

This is the fifth project supported by the EIB in Pakistan. Since it began lending in Asia in 1993, the EIB has provided more than €51bn for long-term investment projects, including €2.4bn in the energy sector.

Germany’s development bank Kreditanstalt fur Wiederaufbau is also providing financial support to the project which has been structured under the mutual reliance initiative.