Tarbela 4th extension: Govt seeks another fund restructuring, reallocation
ISLAMABAD: Amid rising fears of cost overruns and a looming financing crunch, the government has sought the 10th restructuring of the World Bank-funded Tarbela Fourth Extension Hydropower Project, requesting reallocation of funds from other expenditure categories to civil works to keep construction running for at least the next eight months.
Official documents revealed that the restructuring for reallocation of funds in IBRD loan is in response to the request received from Ministry of Economic Affairs on behalf of the Water and Power Development Authority (WAPDA).
The project comprises of: (i) A parent Project financing of USD 400 million in IBRD Loan and Special Drawing Right (SDR) 283.7 million in IDA credit, both approved on March 20, 2012, for the development of a 1410 Megawatt (MW) power plant, the Tarbela Fourth Extension Hydropower Project (T4HP) on Tunnel 4 of the Tarbela Dam and associated costs.
Fund reallocation for timely completion sought: World Bank backs govt, Wapda on T5HP extension
The IBRD Loan and IDA Credit financing T4HP are fully disbursed and closed. Additional Financing of IBRD USD 390 million (IBRD Loan-86460) was approved by the World Bank on September 20, 2016, for the development of another 1,530MW power plant, the Tarbela Fifth Extension Hydropower Project (T5HP) on Tunnel 5 of Tarbela Dam. USD 300 million in co-financing from the Asian Infrastructure Investment Bank (AIIB - Loan LN 0005-PAK), was approved by the AIIB on September 27, 2016, for T5HP.
IBRD Loan-86460 also finances a 500 kilo-Volt (kV) Tarbela 5 Transmission Line (T5TL) from T5HP to Islamabad West Substation (IWS), social and environmental management plans, construction management and supervision, and evaluation of project’s impacts, technical assistance for project management support and audits, independent panel of experts, and future project preparation, and a pilot project. The Closing Date of IBRD Loan-86460 has been extended to September 30, 2027; and AIIB has extended the Closing Date of its loan to June 30, 2028.
Official documents of the Bank revealed that a reallocation of funds to Civil Works from other expenditure categories is necessary to ensure that construction continues without interruption for the next eight months. Within this period, WAPDA must arrange financing to complete the ongoing construction in T5HP.
The Project has un-disbursed loans of USD 256.5 million; however, the IBRD financing for Civil Works has been fully utilised and AIIB financing for the same will be used by October 2025. For Civil Works, payments of Pakistan Rupees (PKR) 43 billion and Chinese Yuan (CNY) 959 million have been certified, and consequently, USD 114.8 million from the IBRD Loan and USD140.4 million from the AIIB Loan have been disbursed, in addition to USD50 million in equity investment from WAPDA.
Civil Works in T5HP is at a critical stage and must continue without major interruptions for the safety of T5HP and the Tarbela Reservoir. The overall physical progress of Civil Works is 54 percent. The vertical shaft of the raised intake has been concreted, a portal has been opened inside Tunnel 5, and highly engineered and critical work to connect Tunnel 5 with the raised intake is under way.
The work on the powerhouse is ongoing and construction of tailrace culvert and channel will gain momentum after October 2025.
The average monthly expenditure for Civil Works has been around USD 10.5 million in the last six months. Between second to fourth quarters of fiscal year 2026, the expenditure on Civil works is expected to be around USD80 million. To manage this, WAPDA has requested reallocation of USD63.53 million from IBRD Loan and USD30 million from AIIB Loan.
The cost of Civil Works has increased, due to: (i) unexpected geological conditions around Tunnel 5 and raised intake requiring increased quantities of excavation, reinforcement, grouting, concreting, etc.; (ii) need for increased reinforcement in the powerhouse; (iii) price adjustments; and (iv) need for replacement and rehabilitation of service and bulkhead gates and lower-level outlet of Tunnel 5.
The shortfall in financing for Civil Works is attributable to the increase in cost. The progress of E&M Works, which sequentially depends on the Civil Works in the powerhouse, is also satisfactory. The physical progress of the E&M Works is around 57 percent.
The large expenditure on the design, supply, and installation contract for the E&M Works corresponds to the supply of machinery and parts, which is expected in fiscal year 2026. After the reallocation of funds through the proposed restructuring, around USD109 million will be available in IBRD and AIIB financing for the E&M works to cover the expenditures in FY26. This restructuring and increase in provisional sum to cover the custom duties and prolongation cost claims by the E&M contractor will create a financing gap in Expenditure Category 2, which must be addressed by arranging additional financing.
The progress T5TL is satisfactory, and the line is expected to be complete before commissioning of the generation units in T5HP. The overall physical progress of T5TL is 86 percent, with 143 out of 189 towers erected and 25 percent of stringing completed.
WAPDA, National Grid Company, Independent System and Market Operator, and the contractors for E&M Works and T5TL have agreed on the schedule for interconnection of Tarbela 5 switchyard with switchyard for Tarbela 1-4. This interconnection will facilitate commissioning and evacuation of power from T5HP while the work on IWS continues.
The costs of the key ongoing contracts in T5HP have increased. WAPDA intends to request additional financing from the Bank and AIIB in fiscal year 2026 to complete the project and currently, the government is reviewing WAPDA’s proposal with revised project costs.
The proposed reallocation of funds will ensure critical construction work in T5HP continues without any interruptions due to financial constraints until the financing gap in the Project is addressed. Additional financing must be arranged in the next eight months, the Bank added.
Copyright Business Recorder, 2025