China firm offers $50b for hydro projects

Published: July 3, 2015
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The Chinese government-owned CTG expressed an interest in financing projects in Pakistan. STOCK IMAGE

The Chinese government-owned CTG expressed an interest in financing projects in Pakistan. STOCK IMAGE

ISLAMABAD: The owner of the world’s largest hydroelectric dam, China Three Gorges Corporation, is willing to participate in a financing consortium to fund up to $50 billion of hydroelectric power projects in Pakistan.

The Chinese government-owned CTG expressed an interest in financing projects in Pakistan in conjunction with the International Finance Corporation, a World Bank subsidiary. This disclosure was made at the meeting of the Cabinet Committee on Energy on June 18. The offer comes on top of the $46 billion in financing for power and transportation infrastructure being provided by the Chinese government and Chinese banks to Pakistan for the construction of the China-Pakistan Economic Corridor (CPEC).

If the offer pans out, it would make China the biggest financier of infrastructure in Pakistan by far. CTG owns and operates the Three Gorges Dam, the world’s largest hydroelectric power plant with a capacity of 22,500 megawatts, nearly matching in one power plant the entire installed capacity of the Pakistani grid of 23,500 MW.

Read: China-Pakistan Economic Corridor: Lines of development – not lines of divide

According to studies conducted by the Water and Power Development Authority, Pakistan has an identified potential of producing up to 60,000 MW of hydroelectric power, of which 40,000 MW is located in a region called the Indus Cascade, which begins in Skardu in Gilgit-Baltistan and runs through to Tarbela, the site of Pakistan’s biggest dam, in Khyber-Pakhtunkhwa.

The biggest project the government has already identified and begun preliminary work on is the Diamer Bhasha dam, which would require $15 billion to construct and would have a nameplate capacity of 4,500 MW.

Pakistan’s energy sources have gone through cycles. Up until the 1980s, the bulk of electricity in Pakistan came from hydroelectric power. In 1994, as the country’s energy needs surged, the government initiated a policy to attract private investment in thermal electricity. Oil prices were low in that decade and so the government made the decision to use oil-fired power plants, a decision that proved costly when oil surged to $100 a barrel, prompting Islamabad to search for cheaper ways of producing electricity. Among those cheap ways is hydroelectric power and coal-fired thermal electricity.

Among other projects the government wants to seek Chinese financing for is the Neelum-Jhelum power project in Azad Kashmir. The 969 MW Neelum-Jhelum hydroelectric power project has been facing rising costs, mainly due to the delays caused by a lack of funding. The project was initially slated to cost $1.8 billion, but will now cost $4.2 billion due to the delays, a major cause of concern for its initial consortium of Middle Eastern financiers which included the Islamic Development Bank (IDB), the Kuwait Fund for Development (KFD), the Saudi Fund for Development and the OPEC Development Fund.

Read: Pak-China economic corridor: Army chief vows to defeat enemy’s designs

The government now expects to raise Rs100 billion ($1 billion) in local borrowing for the plant, in addition to $576 million in foreign borrowing. The government has approached the state-owned National Bank of Pakistan to arrange financing for the local currency component. The Middle Eastern lenders have so far committed $692 million, of which they have disbursed $260 million so far.

“The disbursement of the remaining $433 million has been stopped by the lenders as they are demanding that the contractors should provide performance guarantee for the additional work (variation orders) and cost escalation,” said one source familiar with the cabinet’s deliberations on the matter.

Published in The Express Tribune, July 3rd, 2015. 

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Reader Comments (37)

  • Khan
    Jul 3, 2015 - 9:39AM

    Where does it say that the firm is offering $50bn?

    The firm is ‘willing to participate‘ in a financing consortium to fund up to $50 billion. So it is the ‘consortium‘ that will fund upto $50bn.

    What a play of words by the editors!!Recommend

  • Baba
    Jul 3, 2015 - 10:53AM

    Reading closely reveals that the CTG owns the dam in China. If they invest $50b with a consortium, will they leave out the ownership of hydro projects in PK? Recommend

  • Ashraf
    Jul 3, 2015 - 11:25AM

    Now that the Economic Corridor worth $45 billion has been completed,
    it is time to move on to the next mega project that is nearly $50 billion. Recommend

  • Shakti
    Jul 3, 2015 - 11:27AM

    No dams in GB can be constructed due to India’s territorial claims over it. Recommend

  • Saba
    Jul 3, 2015 - 11:58AM

    Pakistan Energy Mix desperately needs Mega Hydel Dams instead of HFO based IPPS which have ruined Pak Agriculture, Industry & Domestic users. General Ayub Khan gave us 1000MW Mangla Dam and 3750MW Tarbela and after Tarbela Extension 4 & 5, it will be 6350MW with only Rs. 1.25/unit cost. Please invest in Mega Hydel Projects otherwise in next 10 years we will see same conditions in whole Pak as we have seen in Tharparkar and Karachi. Recommend

  • Sehi Banda
    Jul 3, 2015 - 12:26PM

    Hydro-electric dams are the best way forward. They not only provide much needed electric power, but also help manage water resources, control floods, store water for the long term usage, etc. Most countries have Hydroelectric dams which are the nerve center of a National security plan, they ensure water supply, without proper water storage and management lives of hundreds of millions of people are in danger. Recommend

  • Ashraf
    Jul 3, 2015 - 12:37PM

    @Saba:
    Who will finance it? I mean real money, not talk money. China will give a lot of talk money but it is usually the Americans who give the real money. Hydroelectric projects are extremely expensive.Recommend

  • Fahad
    Jul 3, 2015 - 12:57PM

    @Shakti:
    Like anybody care what Indians say . We will take j&k also . Recommend

  • Gp65
    Jul 3, 2015 - 1:54PM

    @Fahad:
    World Bank and ADB care Nd have refused to lend money for Diamer Bashall project without getting a no objection certificate from India. It appears that China requires World Bank to be barred off the lending consortium, hence with Woodbank unwilling to lend to this project, it is unlikely China will also fund this particular project.Recommend

  • Joe
    Jul 3, 2015 - 2:07PM

    @Fahad:
    We will see. This kind of attrition struggle generally end up with one country yielding down to pieces.Recommend

  • Jul 3, 2015 - 2:36PM

    @Shakti:
    Yes, and India should return Goa to Portugal with immediate effect. Recommend

  • Kaleem
    Jul 3, 2015 - 2:37PM

    @Shakti: Bhasha dam is being built in GB. Good Morning! Recommend

  • Shakil
    Jul 3, 2015 - 3:05PM

    Did India stopped building dams in Indian Occupied Kashmir because Pakistan has claims over this disputed territory? Answer is NO! so India should keep its nose away from development projects or conduct a plebbecide to decide Jammu and Kashmir once for all!Recommend

  • nabidad
    Jul 3, 2015 - 3:50PM

    This story is a kind of scam. It seems that government of Pakistan just want to lure poor people of Pakistan. Another lollypop to people of Pakistan to shut their mouth so they even can’t be able to cry. Recommend

  • reader
    Jul 3, 2015 - 4:17PM

    Yes China firm ‘offers’ billions and gazillions. They cannot be ‘interested in investing’ in Pakistan. They can only ‘offer’. Because thanks to Charter of Democracy now we are a begging nation, others must offer us money, but it’s inconceivable that anyone will be genuinely interested in investing here. Recommend

  • M.Saeed
    Jul 3, 2015 - 4:22PM

    These are the fruits of electing our foolhardy politicians that we are facing power shortages of ever increasing proportions while a huge mountain of energy source is sitting idle on “Roof of the World”, waiting to be exploited. It is amazing that, we have some unique and highly profitable sites for hydro-electric power generation but, we refuse even to talk on the subject due to reasons defying all senses. All it needs to generate cheap power is, to route river flows through a,” cascade of dams” and generate power at every viable point where levels are sufficient for the purpose. Fossil fuels saved by generating hydro-electricity would be enough to forget for good, all gas and oil load shedding. Besides, hydro-electricity according to present prices of oil and gas, is almost 16 times cheaper to produce.

    When we consider our leaders the best experts on earth on all technical and professional matters and leave everything to them to decide on their whims, we are bound to fail. We need to educate our leaders and people that, generating electricity from water “does not consume even a single drop of water.” Therefore, their fears of water shortages resulting from dams are baseless, if such dams do not “divert water” to areas other than the natural routes of river flows. Imagine the huge benefits from a single water storage reservoir in Baltistan that can store 35 MAF of surplus “flood water” otherwise flushing into the Arabian Sea during a few days of flood season. That storage is enough to generate 40,000 MW of electricity. It is “Ten times” more than our current power shortage that necessitates horrible load shedding. Huge potential of a large Dam in Baltistan can be appreciated from the fact that, in comparison, “Three Gorges Dam”, of China, the world’s largest, generates only 18,200 MW from 18.0 MAF of water storage.Recommend

  • Human
    Jul 3, 2015 - 6:11PM

    @Shakti:
    No one laughed….Recommend

  • unbelievable
    Jul 3, 2015 - 7:53PM

    Of course your going to have to hire that same firm to build the dams —– so participating in the financing isn’t a gracious as you may believe.Recommend

  • Haider
    Jul 3, 2015 - 8:07PM

    @Gp65
    World Bank and ADP refused in 2012 and demanded India’s NOC but this matter was sorted in 2013.Ishaq Dar on record said World Bank willing without need of NOC from India..If India can make dams in disputed territory why not PakistanRecommend

  • kashif
    Jul 3, 2015 - 9:46PM

    Not so dear Indians, let’s live in peace. Recommend

  • John B
    Jul 3, 2015 - 10:02PM

    @Haider:
    Dont believe in Ishaq Dar’s statement. The investor meeting in Washington Dc did not go as planned. By international law India has the right to j&K not PAK. India has the letter signed by Mountbatten and Maharaja Sigh on J&K and Kashmir assembly. What does PAK have, legally speaking on J&K.

    Until India gives up her territorial claim on PoK which is agreeable to Kashmiris on both side, PoK will not get any serious investments and it will be a drain in PAK economy. Recommend

  • Razi
    Jul 3, 2015 - 10:56PM

    @Gp65

    And here you return with your usual hogwash.Recommend

  • Mughal e Azam
    Jul 3, 2015 - 11:23PM

    @Shakti:
    We claim all of IndiaRecommend

  • waseem
    Jul 4, 2015 - 12:19AM

    @Gp65:
    True that WB and ADB backed out, only this is your wishful thinking about the Indian NOC
    WB clearly stated that they do not wish to lend for any big dames due to environmental affects, and ADB is simply unable to finance something as big as $15B in the absence of WB being there.
    So much amusing that still in the middle tier of third world, Indian treating their hallucinated mind of a super power dreamRecommend

  • zain
    Jul 4, 2015 - 1:21AM

    Whats the point.. Assuming we get this 50 billion which half of it will go to politicians and the other half will be invested into dams but the material used will be below the construction code so its useless. I really don’t know what china is thinking unless there’s a bigger motive behind it. Yes construction of these mega projects in Pakistan in the past 3 years has created employment and increased GDP but it is temporary. Again government will impose new tariffs and taxes to payback, thus bringing more tax burden on the tax payers. Do we even have any competent people in this government…Recommend

  • Haider
    Jul 4, 2015 - 3:32AM

    @John B
    Man according to international law plebiscite was to be done after India took case to UN.If you are so worried about International Law then do plebiscite…….Recommend

  • Khan
    Jul 4, 2015 - 3:33AM

    @Shakti:
    No one cares about India’s territorial claims to GB. Except for India. So india won’t construct dams in GB. Oh well!Recommend

  • Haider
    Jul 4, 2015 - 3:35AM

    @John B
    Then according to International Law plebiscite should be performed in Kashmir…As India took case to UN and as result UN said to plebiscite…
    We shouldnt believe what our Finance Minister says but what you are saying truth..What you are saying is nonsense…..Recommend

  • Khan
    Jul 4, 2015 - 3:35AM

    @Gp65:

    No, the reason they won’t invest in Diamer has nothing to do with India, and everything to do with the $4.5 billion price tag and relocation of 250,000 people. The project is too expensive.Recommend

  • Khan
    Jul 4, 2015 - 3:39AM

    @John B:
    If you want to talk about instrumany of ascession,Then please give us back junagadh which belongs to us by your logic. Including somnath temple, which we will immediately destroy. The reality you indians don’t understand is that no one in the entire world aside from india believes that kashmir is a legal part of india. Absolutely no one at all. And the maharaja was a despot anyway who had only nominal control over GB, so no one really cares about his signature.Recommend

  • ajeet
    Jul 4, 2015 - 6:48AM

    Nice assets for target practice if Pakistan turns naughty.Recommend

  • Humza
    Jul 4, 2015 - 6:51AM

    @John B: Say what you will but in the court of public opinion, the world knows that the majority of Kashmiris in occupied Kashmir considered their land occupied. That’s why they raise the Pakistani flag. Think about it, when there are border tensions, local Kashmiris in Azad Kashmir fight Indian forces. One day, the voice of the majority will be heard because you can’t people hostage forever in today’s world.Recommend

  • Jul 4, 2015 - 8:36AM

    This news has been coming in Pakistani newspapers for last 50 years. Nothing ever happened or will ever happen.Recommend

  • usman777
    Jul 4, 2015 - 9:58AM

    @dipak, all the more reason for you to never come back again.Recommend

  • Jul 4, 2015 - 11:31AM

    [email protected]: why would anyone want to come to Pakistan. India is stronger, richer, more intelligent and has now a real patriot in Modi. You guys don’t count anywhere in the world.Recommend

  • Mrs Juicy Gossips
    Jul 8, 2015 - 10:11AM

    @Dipak: But are men are so much more handsome and attractive !Recommend

  • Zubair
    Nov 25, 2015 - 8:23PM

    @Shakti: let the people of azad kashmir live happy in pakistan.why india is trying to stop development of kashmir’s people?Recommend

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