300MW Balakot Hydropower Project: PEDO faces opposition due to high cost

ISLAMABAD: The 300MW Ballakot Hydropower Project of the Pakhtunkhwa Energy Development Organisation (PEDO) continues to face serious opposition, with both public sector entities under the Power Division and private stakeholders reluctant to support it due to its high cost and proposed take-or-pay mode.

This emerged during a public hearing held by the National Electric Power Regulatory Authority (Nepra) on Tuesday, presided over by Chairman Waseem Mukhtar along with Member (Tariff and Finance) Amina Ahmed and Member (Development) Maqsood Anwar Khan.

The project has been included as a committed scheme in the proposed Indicative Generation Capacity Expansion Plan (IGCEP) 2025–35.

READ MORE: 300MW Balakot Hydropower project: Nepra initiates tariff determination

However, industrial stakeholders argued that it should instead be treated as a strategic project and financed through the Public Sector Development Programme (PSDP), rather than imposing a tariff exceeding Rs17 per kWh (6.3576 US cents/kWh) on consumers.

PEDO filed its tariff petition on October 10, 2025, under the Nepra (Tariff Standards and Procedures) Rules, 1998, which was admitted on December 2, 2025.

According to project details, the plant factor is estimated at 43.5 percent, with financing based on a mix of foreign and local debt.

The foreign loan carries a rate of six-month FOFR plus a spread of 0.75 percent, while local borrowing is based on six-month KIBOR plus a spread of 3 percent. The repayment period is 20 years.

The project envisages a 10.21 percent equity component with a 17 percent return on equity (RoE), indexed to the US dollar. Financing cost on working capital has been proposed at three-month KIBOR plus 2 percent. The total project cost is estimated at USD 612.56 million, calculated at an exchange rate of Rs278.57 per dollar, and is being developed under the Power Generation Policy 2015.

Nepra raised concerns regarding the claimed EPC cost of USD 513.22 million, which includes a foreign component of USD 303.09 million and a local component of Rs34.008 billion, inclusive of duties, taxes, and price escalation.

Member (Tariff and Finance) Amina Ahmed questioned the sponsors on their request to approve the project under a take-or-pay mechanism instead of take-and-pay, particularly in terms of ensuring debt servicing and equity recovery.

The authority also raised concerns over the 17 percent dollar-indexed RoE. During the hearing, confusion was noted on the mechanism for dollar procurement, which was clarified by Director General (Tariff) Muhammad Yousaf.

Arif Bilwani, one of the interveners, argued that since the project is being developed by PEDO in Khyber Pakhtunkhwa, its electricity should be used to provide affordable power to local industry and consumers rather than being fed into the national grid.

He also criticised the project’s profitability assumptions, take-or-pay structure, and dollar indexation, citing the example of the 969MW Neelum-Jhelum Hydropower Project, which has remained non-operational due to tunnel collapse.

“The impact of such projects is already evident. I have spent years analysing similar cases,” he remarked.

Another intervener, Rehan Javed, opposed the project and urged PEDO to reconsider it, arguing that Pakistan already has surplus generation capacity and consumers cannot afford expensive electricity.

“I request PEDO to withdraw this project. It should be treated as a strategic initiative instead of a committed one,” he said.

A representative of the Central Power Purchasing Agency-Guaranteed (CPPA-G) avoided taking a clear position, shifting the responsibility for project approval elsewhere, while officials from the Private Power and Infrastructure Board (PPIB) raised questions regarding the project’s feasibility and vetting by an international panel of experts.

Notably, there was no representation from the National Grid Company (NGC) or the Independent System and Market Operator (ISMO), including the National Power Control Centre (NPCC).

Member (Tariff and Finance) directed all relevant entities under the Power Division, including CPPA-G, PPIB, NGC and ISMO, to submit their written comments within the stipulated timeframe.

Copyright Business Recorder, 2026