World Bank approves addition $700 million for Dasu project

ISLAMABAD: The World Bank approved a $700 million additional credit line for Pakistan to finance the first phase of Dasu hydropower project that would supply affordable electricity to millions of users.

The additional fund would finance the transmission line to complete the first phase of the Dasu hydropower plant that would install 2,160 megawatts capacity along the main Indus River.

World Bank Country Director for Pakistan Illango Patchamuthu said Pakistan’s energy sector is aiming to move away from high-cost and inefficient fossil fuels towards low-cost, renewable energy to power the national grid. “Along with reforms in the tariff structure, the Dasu hydropower project will result in fewer imports of fossil fuels, alleviating the stress on the country’s current account balance,” he said in a statement.

In 2014, the Executive Committee of the National Economic Council approved the PC-1 of Dasu project stage–1 with a total cost of Rs486 billion. Subsequently, the World Bank approved the base cost of the project to be $4.247 billion of the project. In 2015, the World Bank sanctioned $588 million to get the financial close concluded under the International Development Association credit-1. The project would be financed from the International Bank for Reconstruction and Development with a variable spread and 25 years maturity including a 5-year grace period.

The World Bank said the support for one of country’s longer-term development priorities comes as the World Bank is also working with the federal and provincial governments to prepare and respond to the immediate challenge of the COVID-19 outbreak. “The project will help to lower the overall cost of energy generation in Pakistan, benefiting millions of energy users by making electricity more affordable for households and productive sectors, such as manufacturing and agriculture.”

The Dasu hydropower plant would provide most of its electricity during the summer months to reduce blackouts when demand is the highest. The project also contributes to the socioeconomic development of the communities in Dasu and surrounding areas of the upper Kohistan district of Khyber Pakhtunkhwa. “The Dasu hydropower plant has a low environmental footprint and is considered to be one of the best hydropower projects in the world,” Rikard Liden, the project’s task team leader said. “It will contribute to reducing Pakistan’s reliance on fossil-fuels and producing clean renewable energy.”

Dasu hydropower station is expected to produce electricity at $0.03/kilowatt-hour (kWh) compared to Pakistan’s current average cost of electricity generation of $0.08/kWh. “This investment in the energy sector is an important step in Pakistan’s path towards becoming an upper middle-income country by 2047, as articulated in Pakistan@100: Shaping the Future,” the World Bank said.

Plans for stage II expansion would double the installed capacity to 4,320MW, making Dasu the largest hydropower plant in the country.