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Silk Road Fund embarks on first investment project

Silk Road Fund embarks on first investment project

(27 April 2015 – China)  The Export-Import Bank of China is the lead in a consortium of lenders providing investment as part of the The Silk Road Fund’s debut investment in a Pakistan power project.

The Silk Road Fund, a fund management company, signed a memorandum of understanding with China Three Gorges Corp and the Pakistan Private Power and Infrastructure Board to provide capital to construct the Karot Hydropower Project on the Jhelum River, in the country’s northeast.

It is the fund’s first investment project since being established in Beijing in December.

According to the memorandum, the fund will inject capital and be a major shareholder in China Three Gorges South Asia Investment Ltd, a subsidiary of the China Three Gorges Corp, to support clean-energy development projects in Pakistan.

Karot Hydropower Station is a priority project within the broader China-Pakistan Economic Corridor initiative, proposed by Chinese Premier Li Keqiang in May 2013.

The initiative aims to build a CNY$46 billion (A$9.59 billion), 3,000-kilometer route from the Xinjiang Uygur autonomous region, through the Karakoram mountain range and Pakistan's Balochistan, to the Gwadar Port, connecting China, Pakistan and the Arab world.

The project is also in stage four of the river’s five-stage development plan, with an installed capacity of 720,000 kilowatts, and an annual power generation capacity of 3.2 billion kilowatt-hours. It requires a total investment of about CNY$1.65 billion.

Chinese companies plan to develop a total capacity of 3,350 megawatts along the Jhelum River through new developments and mergers and acquisitions, according to a statement from the fund.

Construction on the hydropower project “is to start by the end of this year and go into operation in 2020”, the statement said.

“The station will be operated by the Chinese side for 30 years and then transferred to the government of Pakistan.”

In November, President Xi announced during the Beijing Asia-Pacific Economic Cooperation meetings that China would contribute CNY$40 billion to set up the Silk Road Fund.

He stressed that the fund will be used to provide investment and financing support for infrastructure, resources, industrial cooperation, financial cooperation and other projects in countries involved in the Belt and Road initiative.

Chinese central bank governor Zhou Xiaochuan has described the fund as a “private equity” investor with a longer investment return.

The initial capital of the fund was CNY$10 billion, including CNY$6.5 billion from the foreign exchange reserve; CNY$1.5 billion from the sovereign wealth fund, China Investment Corp; CNY$1.5 billion from the Export-Import Bank of China; and CNY$500 million from the China Development Bank.

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