Pakistan & Private Equity

The Sardar Law Firm recently analyzed a prospective alternative energy joint venture between a North American company and a public-private partner in Pakistan on behalf of a consultancy. The firm analyzed the creation and sustainability of a JV; financing through private equity structures; foreign exchange hedging; and agro-energy economic factors relevant to the project in Pakistan.

The current fiscal crisis has least affected private equity funding, which bears positively on international project financing in emerging markets. Emerging markets private equity will continue to present attractive investment opportunities this year. Recent EM-PE funds will likely outperform equally developed market funds because of a lower reliance on debt-to-finance transactions despite general economic decline. Still, the average risk premium for EM-PE has risen to 7.2% from 6.7% in 2008. Over three quarters of investors (78%) currently invested in EM-PE plan to commit additional EM managers and/or geographies over the next 5 years. Further, nearly two-thirds of investors (62%) with current exposure to EM-PE expect the dollar value of their new commitments to remain steady or rise in 2009 relative to their actual commitments in 2008. Merely 26% of investors who intend to reduce commitments are doing so to refocus on developed markets. Of the investors who do not have exposure to EM-PE, over 35% expect to commit to private equity investing within the next 12-to-24 months.

With the private equity market relatively healthy for current and new investment, Pakistan and other emerging economies have seen an increase in project financing. Any prospective investor or project developer however, should seek legal counsel when navigating the complex international regulatory terrain covering equity, financing, government approval, and project implementation.