Shams Power Limited, Pakistan’s leading solar energy developer and investor, has successfully received finds worth PKR 2 billionfor the solar plants from Bank Alfalah with a partial credit guarantee covering 75 percent of the facility from GuarantCo, part of the Private Infrastructure Development Group (PIDG).

The funds will support Shams Power for the construction of approximately 21 MW rooftop and ground-mounted solar plants at commercial, industrial, and institutional (e.g., university, hospital) sites across Pakistan to reach grid-connected users.

As per the note, Bank Alfalah will provide Sham Power with the financing in the form of a 10-year term loan totalling PKR 2 billion that benefits from the Renewable Energy Refinancing Scheme set up by the State Bank of Pakistan. Shams Power and GuarantCo have also agreed on an additional partnership worth PKR 1.5 billion to support Shams Power’s further debt raising in 2022 to construct approximately another 21 MW of distributed solar plants.

“The projects will improve the efficiency of Pakistan’s energy sector by generating clean energy near the point of consumption, which will reduce line losses and losses associated with the national grid and will stabilize the grid during peak hours. Shams Power helps reduce carbon emissions and positively impacts climate change mitigation by providing clean solar energy,” said the note.

The deal could transform Pakistan’s rooftop solar market by demonstrating rooftop solar suppliers’ ability to access local debt financing. The transaction also builds the capacity of energy regulators and the SBP, allowing them to create a supportive and pragmatic regulatory and financial framework, and builds the capacity of new banks in this asset class.

Omar Malik, CEO of Shams Power, said, “We are delighted to have successfully completed this landmark transaction. This will enable Shams Power to expand our portfolio of high-quality projects across the C&I sector and extend our renewable energy footprint. These projects will enable our clients to reduce their carbon emissions, meet sustainability targets, and reduce costs of production. They will also generate employment during construction. GuarantCo’s credit guarantee and Bank Alfalah’s tremendous support were critical in making this possible.”

Emily Bushby, Interim CEO of GuarantCo, said,“The innovative financing mechanism for this transaction has the potential to drive significant growth in the rooftop solar market in Pakistan. The model is scalable, replicable and the need for guarantee support will hopefully reduce over time. This transaction supports Pakistan’s commitments to decarbonise its power sector and to meet GuarantCo’s mission of mobilising new sources of local currency financing. Through our transaction with Shams Power, we will support Pakistan in its ambition to provide economical, clean and consistent energy supply to businesses and gradually shift towards renewable energy supply and improve energy access, involving the private sector and local currency financing.”

Atif Bajwa, CEO of Bank Alfalah, said,“While Bank Alfalah is at the forefront of facilitating our clients’ energy needs, this is a first of its kind distributed solar model of such magnitude for the Bank. Successful execution of this model will not only set up a framework for future distributed solar projects to follow, but will also pave way for numerous businesses to achieve significant energy savings with minimal capital expenditure. In line with Bank Alfalah’s Green Banking policy, Bank Alfalah remains committed towards renewable energy financing and is proud to play its part in reducing carbon footprint across Pakistan and combating climate change. We would also like to applaud State Bank of Pakistan’s Financing Scheme for Renewable Energy which is encouraging investments and taking us a step closer to achieving the government’s clean energy vision.”

Asif Elahi, Partner of Capital Resource, said, “We are thrilled to have had the opportunity of supporting Shams Power in achieving their financing objectives. There has been exponential growth in roof top solar power in regional countries with us lagging behind. The credit enhancement and financing support from GuarantCo and Bank Alfalah teams will go a long way in helping bridge this gap allowing Shams Power to become the leading distributed solar company in Pakistan.”