Degree

Master of Science in Finance

Department

Department of Finance

School

School of Business Studies (SBS)

Date of Submission

Spring 2026

Supervisor

Dr. Saqib Sharif, Associate Professor, Department of Finance

Project Type

Research Project

Document Type

Restricted Access

Pages

viii, 26

Keywords

Blended Finance, Wind Energy, Project Finance, Concessional Finance, Cost of Capital, Renewable Energy Finance, Competitive Trading Bilateral Contract Market (CTBCM)

Abstract

This Research Project (Project) examines how blended finance, through the strategic use of concessional and commercial capital, can reduce the cost of capital and support investment in Pakistan’s wind energy sector. It is set in the context of reforms under the Competitive Trading Bilateral Contract Market (CTBCM), which aim to shift Pakistan’s electricity market from a single-buyer model to a competitive multi-buyer framework. Although CTBCM is expected to improve efficiency, financing constraints are likely to persist in the near term due to legacy sector risks and slow pace of institutional change.

To assess these elements, this Project develops a project-finance model for a 50 MW onshore wind farm in Pakistan and compares two scenarios: commercial finance and concessional/blended finance. The model uses Pakistan relevant assumptions and draws on concessional features from earlier IFC supported wind transactions. It also reviews recent literature on CTBCM, renewable energy finance, and blended finance to consider how this mechanism could support Pakistan’s new market structure.

The results show that blended finance materially improves financial viability. The concessional case increases Equity IRR from 9.9% to 15.9%, shortens equity payback from 15 years to 9 years, improves minimum DSCR from 0.8x to 1.0x, and lowers LCOE from USD 44.4/MWh to USD 39.6/MWh. The Project concludes that blended finance can act as a transitional mechanism under CTBCM by improving bankability and helping attract private investment into Pakistan’s wind sector. It also recommends additional mechanism via which blended finance could be incorporated into the CTBCM framework.

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