World Bank approves $1 bn loan for China-backed hydropower project in Pak

The World Bank has approved an additional loan of $1 billion for cash-strapped Pakistan to support the China-backed Dasu hydropower project in the restive Khyber Pakhtunkhwa province.

According to a report in the Express Tribune newspaper, this constitutes the third major financing by the global lender for the project, which earlier secured $588.4 million for preparatory works and an additional $700 million for constructing the transmission line to transmit electricity from the project.

The Dasu hydropower project, situated approximately 300 km north of Islamabad in the unruly Khyber Pakhtunkhwa province, is being developed by China Gezhouba with funding from the global lender and has endured at least two deadly terrorist attacks targeting Chinese nationals involved in its construction.

The World Bank in a press release on Monday said it has approved $1 billion additional financing for the DASU Hydropower Stage I (DHP I) Project.

"This financing will support the expansion of hydropower electricity supply, improve access to socio-economic services for local communities, and build the Water and Power Development Authority's (WAPDA) capacity to prepare future hydropower projects," it said.

Najy Benhassine, World Bank Country Director for Pakistan, said the country's energy sector suffers from multiple challenges to achieve affordable, reliable, and sustainable energy.

"The DASU Hydropower Project site is one of the best hydropower sites in the world and is a game changer for the Pakistan energy sector. With a very small footprint, the DHP will contribute to greening' the energy sector and lowering the cost of electricity, he said in the release.

The World Bank said upon completion, the hydropower plant will have an installed capacity of 4,3205,400 MW.

DHP-I is an essential project in Pakistan's efforts to reverse its dependence on fossil fuels and reach 60 per cent renewable energy by 2031, said Rikard Liden, Task Team Leader for the project.

The additional financing will facilitate the expansion of electricity supply and potentially save Pakistan an estimated $1.8 billion annually by replacing imported fuels, and offset around 5 million tons of carbon dioxide, he said.

"The annual economic return of DHP-I is estimated to be around 28 per cent, the press release quoted Liden as saying.

In March, a suicide attack claimed the lives of five Chinese engineers and their Pakistani driver at the project site. In July 2021, ten Chinese nationals were killed and 26 others injured in a suicide attack on a bus en route to the Dasu Hydropower Project.

Cash-strapped Pakistan provided $11.6 million in compensation to the Chinese nationals affected by the terrorist incidents.

China Gezhouba Group Company (CGGC) serves as the contractor for the Dasu Hydropower Project.

Pakistan urgently requires cheaper electricity resources to reduce reliance on expensive imported fuel-based power generation. High electricity costs have prompted households, factories, mosques, and hospitals to turn to solar power generation, increasing the burden on those still connected to the national grid, the Express Tribune newspaper reported.