ISLAMABAD: The World Bank (WB) has agreed to amend both IBRD and AIIB loan agreements to facilitate payment of all expenditures incurred under Tarbela Fifth Hydropower Extension Project (T5HP) considering Pakistan is facing financial constraints especially in foreign currency payments.
This was conveyed by the World Bank’s Country Director Najy Benhassine in letters to Secretary Ministry of Water Resources Dr Kazim Niaz and WAPDA Chairman Lt-Gen Sajjad Ghani (retired).
The World Bank conducted an implementation support and review mission for Tarbela Fourth Extension Hydropower Project (T4HP) and Tarbela Fifth Hydropower Extension Project (T5HP) from August 1 to 31, 2022.
The team met with the officials from Ministry of Water Resources, Ministry of Energy and Economic Affairs Division (EAD), WAPDA chairman and management, the managing director of the National Transmission and Dispatch Company (NTDC) and NTDC management as well as project directors and project teams from WAPDA and NTDC.
The Task Team held a series of technical discussions with WAPDA and NTDC and discussed different issues related to the project.
According to him, Tarbela Fourth Extension Hydropower Project (T4HP) produces significant economic benefits for Pakistan. It was commissioned in 2018 with cost savings, and until August 2022 T4HP has generated over 15,500 Gigawatt hours (GWh) of electricity.
It provides cheap, clean electricity to the country at a nominal marginal cost. In comparison to power plants running on imported Re-gasified Liquefied Natural Gas (RNLG) the T4HP has generated estimated economic benefits of over $2 billion so far, which is about three times the cost of the project.
The World Bank has submitted following further information: (i) based on the letter from EAD, Special Drawing Rights (SDR) 23.3 million (around $30.4 million) will be cancelled from the IDA Credit 50790 financing T4HP. These, along with SDR 81.9 million previously cancelled in 2016, are savings in T4HP;(ii) WAPDA intends to use the remaining balance in the IDA Credit to close out the main contracts, purchase equipment, and for contingencies.
Agreement signed with AIIB for water, wastewater management project of Lahore
IDA Credit currently has an undisbursed balance of SDR 52 million. WAPDA must complete all activities, which are to be financed by the IDA Credit, by December 31, 2022; and (iii) IDA Credit will be closed on December 31, 2022. WAPDA can submit withdrawal applications for eligible project expenditures incurred by the closing date, till April 30, 2023.
Tarbela Fifth Extension Hydropower Project (T5HP) can be commissioned in July-August 2025 if tunnel 5 is handed over to the contractors in September 2022 for a construction period of thirty-three months. Key contracts for T5HP have been awarded, civil works and electromechanical works are underway, and therefore, the closure of tunnel 5 during the construction period is on a critical path. The closure of tunnel 5, during the construction and operation of T5HP, will have an insignificant impact on water releases from the Tarbela reservoir.
Tunnel 5 is only used for water releases for a few days during the months of May and June during a year when reservoir level is below the spillway level. In the long run, during T5HIP operation, tunnel 5 will be available for water releases from the existing low-level outlet as it has been the case in the past without imposing any constraints on water released to the river.
During the construction period, sufficient water release capacity from the existing tunnels 1 to 4 can be ensured during the months of May and June through proper operation of Tarbela Reservoir (minimum reservoir level of 1432 feet above sea level would provide sufficient release capacity from tunnel 1 to 4). After the construction period, the existing low-level intake of tunnel 5 will remain operational as before.
However, the water released through the tunnel will generate cheap electricity providing 1,530 megawatts (over 1,500 Gigawatt-hours annually) during summer, when electricity demand is the highest. T5HP will prolong the useful life of tunnel 5 and Tarbela Reservoir and water releases from the reservoir as the raised intake constructed under the project will be made operational when sediment reaches tunnel 5, blocks its lower intake, and makes it inoperable.
The Bank maintains that over $100 million has been spent on TSHP already (about $ 56 million from the IBRD loan, about $ 42 million from the AIIB loan and the remaining from WAPDA) and its timely completion is crucial for the country. The Bank has urged WAPDA and Ministry of Water Resources to facilitate a decision to handover Tunnel 5 to the contractors in September 2022. This is a critical next step for timely commissioning of T5HP, which will generate sustainable, cheap, domestic electricity.
As requested by EAD by letter on August 22, 2022, the World Bank is processing an amendment to the IBRD loan that will allow 100 percent financing of the expenditures of T5HP, effective from the date of the EAD request letter of August 22, 2022. Both IBRD and AIIB Loan Agreements would be amended to facilitate payment of all expenditures incurred under the project considering that Pakistan is facing financial constraints, especially in foreign currency payments.
For the construction of a 500 kilovolt (kV) double circuit line from Tarbela to Islamabad West Substation (T5TL), a contract has been signed by NTDC; and advance payment will be made to the contractor in September 2022.
Copyright Business Recorder, 2022
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