Cost overruns: Another USD300m sought from World Bank for ‘T4HP’

ISLAMABAD: The government has sought a second additional financing of USD 300 million from the World Bank for the Tarbela Fourth Extension Hydropower Project (T4HP) to address cost overruns in the Tarbela Fifth Extension Hydropower Project (T5HP).

Official documents revealed that T5HP is at an advanced stage of construction, with progress described as highly satisfactory and commissioning of the generation units expected in July 2027.

The documents stated that completion of T5HP is essential for the safe operation of Tunnel 5 and the Tarbela Reservoir, Pakistan’s most critical infrastructure for irrigation and electricity generation.

The proposed AF will be the final tranche of investment from the World Bank to help achieve the outcomes envisaged under T5HP.

READ MORE: T5HP advancing on schedule: T4HP now fully operational: World Bank

T5HP finances: (i) a hydropower component comprising the construction of a 1,530-megawatt (MW) powerhouse and a raised intake in the existing Tunnel 5 of the Tarbela Reservoir; and (ii) an associated 500-kilovolt (kV) double-circuit Tarbela Transmission Line (T5TL) from the switchyard of the T5HP powerhouse to the Islamabad West Substation (IWS), along with interconnections between this switchyard and those of other power plants in the Tarbela complex.

The hydropower component is being implemented by Water and Power Development Authority (WAPDA), while T5TL is being executed by the National Grid Company (NGC), formerly known as the National Transmission and Despatch Company (NTDC).

Although T5HP finances distinct and separate infrastructure, the International Bank for Reconstruction and Development (IBRD) loan of USD 390 million for T5HP was processed as the first Additional Financing under T4HP, the parent project.

Existing financing for T5HP also includes a co-financing loan of USD 300 million from the Asian Infrastructure Investment Bank (AIIB), along with equity investment from WAPDA.

The AF has been sought because the cost of civil works under the hydropower component has increased due to unprecedented inflation, higher quantities of construction work, the need to replace and rehabilitate the gates in Tunnel 5, and interest accrued during construction.

The parent project financed a 1,410 MW powerhouse and modifications to Tunnels 3 and 4 of the Tarbela Reservoir. WAPDA was also the implementing agency for T4HP, which was completed and has been operational since 2018. The International Development Association (IDA) credit and IBRD loan for T4HP have already been closed.

The parent project (P115893) comprises: (i) T4HP, financed through a USD 400 million IBRD loan and Special Drawing Rights (SDR) 283.7 million in IDA credit, both approved by the World Bank on March 20, 2012. T4HP has been completed, and the IBRD loan (IBRD 81440) and IDA credit (IDA 50790) were fully disbursed and closed by June 2023; and (ii) the T5HP hydropower component and T5TL, financed through a USD 390 million IBRD loan (IBRD 86460), approved by the World Bank on September 20, 2016, as Additional Financing under T4HP.

T5HP was among the first World Bank projects in Pakistan to be co-financed by the World Bank and AIIB, with AIIB contributing USD 300 million. The AIIB loan was approved on September 27, 2016.

The IBRD loan 86460 also finances social and environmental management plans, construction management and supervision, evaluation of the project’s impacts, technical assistance for project management support and audits, an Independent Panel of Experts (IPOE), piloting of a floating solar project, and preparation of future projects.

The closing date of IBRD loan 86460 has been extended to September 30, 2027, while AIIB has extended the closing date of its loan to June 30, 2028.

Copyright Business Recorder, 2026