The World Bank has agreed to extend a new loan of $ 1 billion for the first stage of the DSU hydroelectric project, pending the approval of the concept of the revised project 1 (PC-1), which now reflects a major escalation of costs.
The estimated cost of the project increased by 190 % from 586 billion rupees to 1.700 billion rupees, due significantly to long land acquisition, security challenges, and a sharp decline in the Pakistani rupees against the US dollar.
DSU, a river operating project on the Sind River in the Alawite Kohstan, is being developed in two phases. It is expected that the second stage of 2,160 megawatts (MW) is expected to be born through six units of 360 megawatts each, while the completion of the second stage will raise a total capacity to 4320 megawatts.
The project will eventually produce 21,445 GB (GWH) annually, as the first phase contributed to 122222 years.
The World Bank had previously provided $ 588 million to the project and offered guarantees to secure 460 million dollars from international lenders.
Under the new financing structure, $ 800 million will come from a billion dollars loan from the International Development Association (IDA), while $ 200 million will be extended through the World Bank for Reconstruction and Development (IBRD).
Of the IDA part, $ 435 million will be issued at zero interest, while the remaining $ 365 million and IBRD loan will carry interest rates of 5.83 % and 6.13 %, respectively.
The Ministry of Water Resources has terminated the revised PC-1 and is scheduled to be submitted to the Planning Committee for approval in the coming days. Once removed, the Water and Energy Development Authority (WAPDA) and the World Bank officially will sign the financing agreement.
It is originally scheduled to be completed by 2023-24, the first phase of the project is now expected to be operated by 2027-28. Delay in the acquisition of lands, which was supposed to be completed by 2014 but extended to 2021-22, greatly affected the timelines and costs.
In addition, the decrease in the value of the Pakistani rupee – which can accommodate 100 rupees per US dollar to 278 rupees – amplifies more expenses.
