Pakistan International Airlines (PIAC) is required to overhaul 14 engines for its 9 Boeing 777 aircraft during the next two years at an estimated cost of $8 to $10 million per engine, it was learnt. Sources said that the Economic Co-ordination Committee (ECC) of the Cabinet had approved $150 million government of Pakistan guarantee to Islamic Corporation Insurance of Investment and Export Credit (ICIEC) and EximBank (US) to finance the overhaul of engines.
General Electric, the original equipment manufacturer, has initiated a financing arrangement of US $150 million with the help of EximBank and ICIEC. The EximBank would provide its guarantee for US origin parts only, which is estimated to be 45% of the total cost which amounts to $68 million. The financing by the EximBank would be for a period of two years with semi annual repayment and quarterly principal mark up. The mark up would be 3M London Inter Bank Offered Rate (LIBOR) plus 0.70 per cent with upfront fee 0.9 per cent. All in cost Internal Rate of Return (IRR) basis is 5.12% as per agreed terms and conditions.
The remaining 55% financing would be provided by ICIEC, which amounts to $82 million for a period of two years with repayment semi annually at quarterly interest rate of 3M LIBOR plus 2.75% and upfront fee 2.25%. All in cost IRR basis is 7.61%.
The GE has reportedly offered to provide support of $0.9 million against mark up if all overhaul work arising in the next two years is given to the GE exclusively.
Sources said that a summary moved by the Aviation Division, after the authorisation of Prime Minister Muhammad Nawaz Sharif in the capacity of Minister Incharge, states that both institutions require the government of Pakistan guarantee. The summary was approved by the ECC meeting chaired by Finance Minister Ishaq Dar.
Author: Zaheer Abbasi
Source: Business Recorder