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Print Print 2024-06-02

Power generation component of DBDP: PM likely to seek Chinese investment

  • The premier will request assistance from Beijing as borrowing capacity from the international capital and financial market is constrained due to sovereign credit rating and economic vulnerabilities
Published June 2, 2024

ISLAMABAD: Prime Minister Shehbaz Sharif is likely to seek Chinese investment in the power generation component of 4,500 MW Diamer Bhasha Dam Project (DBDP) as borrowing capacity from the international capital and financial market is constrained due to sovereign credit rating and economic vulnerabilities amidst ongoing challenges posed by increasing external financing needs, sources close to Chairman WAPDA told Business Recorder.

Sharing the details, sources said DBDP is a multipurpose project with an installed capacity of 4,500 MW, and a gross storage capacity of 8.1 MAF. The project will generate 18.1 billion units per annum (an additional 2.5 billion units in existing downstream projects). This project is critical to restore energy sector viability and reduce carbon footprint in the current energy mix. The project assumes multifarious advantages because of its large water storage capacity that can mitigate Pakistan’s water scarcity problems and help augment irrigation water supplies for the Indus Plain and safeguard the food security of Pakistan while driving the development of allied industry and other sectors and promoting the economic and social development of Pakistan.

The entire Project comprises of three components namely, dam, power generation and LA&R (land Acquisition & Resettlement). The PC-1 for the dam part was approved by ECNEC in November 2018 and is now in the implementation phase, while the 2nd revised PC-I for LA&R was approved in April 2021 at the cost of Rs 175 billion. The PC-1 for the power generation facilities was approved by ECNEC in April 2023 at a total cost of Rs 1.424.36 trillion

Pakistan’s power generation falls over 8% year-on-year

A major challenge for timely implementation of the Project is the financing cost and efforts have been ongoing to find an anchor financier. With the support of the EAD, WAPDA has reached out to various Multilateral Development Banks (MDBs) including SFD, ISDB, ADB and AIIB but a breakthrough is awaited.

“The overall foreign exchange needs of the project are $ 4.0 billion, out of which, WAPDA has raised $ 500 million through a Green Eurobond issuance for meeting the initial forex requirements. However, the borrowing capacity from the international capital and financial market is constrained due to sovereign credit rating and economic vulnerabilities amidst ongoing challenges posed by increasing external financing needs, “the sources quoted Chairman WAPDA, Lt. Gen Engineer Sajjad Ghani( retired) as saying, in his communication with concerned quarters.

Additionally, WAPDA is pursuing avenues for financing DBDP through the following two options:

(i) partial divestment of WAPDA equity shareholding in Ghazi Barotha Hydropower Project. In this case, an MoU was signed between GOP and Kuwait Investment Authority (KIA) for executing the process through KIA’s subsidiary Enertech. WAPDA is in the process of hiring sell-side Transaction Advisor’ and would start engagement with Enertech after their onboarding; and (ii) an investment/debt arrangement with KSA wherein WAPDA will earmark a slice of its revenue to a financing vehicle created for this purpose which will be paid out to the foreign investor and would essentially cover the expected Return on Equity (RoE) as well as the redemption of the investment. The debt portion is being sought through the Saudi Fund for Development (SFD).

During the preparatory meeting for the upcoming visit to China, the Prime Minister has directed that Diamer Bhasha Dam Project (DBDP) be considered for inclusion into CPEC portfolio.

In this regard, WAPDA has recommended that the ‘Power Generation Component’ of the DBD Project be pitched as a big-ticket project with the Chinese Government and a’ Framework Agreement for review of feasibility study of the Power Generation Component’ be agreed during this visit.

The sources said, WAPDA has requested consideration of its proposal in 13 Joint Task Cooperation Committee as it was discussed in the preparatory meeting for the committee held on May 21 2024 under the chairmanship of Federal Minister for PD&SI.

Copyright Business Recorder, 2024

Comments

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Re=== Jun 02, 2024 05:21am
IF the Chinese invest in another power plant in Pakistan they would be the most stupidest people on earth
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Maqbool Jun 02, 2024 10:37am
I’m a simple man, please question my maths. We have 40,000 mw+ of installed capacity and only 22,000 mw transmission capacity. We use less than 20,000 mw and we now are setting up more power plants !?
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Saeed Jun 02, 2024 12:02pm
Now Its Just Sad
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Sagar Baloch Jun 02, 2024 01:31pm
@Pakistani, yea they still don't know how to suck the blood of poor people,how to loot money from national treasure.how to earn money by taking bribe from large companies.PPP,PML-N and MQM-P,They want to negotiate with PTI.they want to tell PTI that there is alot of Money in Pakistan and we can loot them together.IDK why PTI doesn't agree with them.
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KU Jun 02, 2024 02:37pm
Energy sector's low cost electricity is the only hope for economic revival, yet we read news on delaying this objective. Solar/wind energy is equally important in bringing down difficulties of people.
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