ADB approves $300 million loan for hydropower project

KARACHI: Pakistan has received Asian Development Bank (ADB) approval for $300 million loan to construct the Balakot hydropower plant, in which the government would invest $175 million, while it would seek $280 million co-financing from the Asian Infrastructure Investment Bank.

The ADB approved the loan on Tuesday to finance the construction of the 300 megawatt run-of-river hydropower plant on the Kunhar river that would increase the share of clean energy in Pakistan and improve the country’s energy security.

“The government will invest $175 million in the project. It has also requested a $280 million loan in project cofinancing from the Asian Infrastructure Investment Bank,” a statement said.

The plant would add 1,143 gigawatt-hours of clean energy annually to the country’s energy mix, enhancing the energy sector’s reliability and sustainability. The plant, which would incorporate seismic strengthening and climate-proofing measures, would be built on the Kunhar river near Balakot City in Khyber Pakhtunkhwa Province and commissioned by 2027.

The strategic agendas of the project include environmentally sustainable growth and inclusive economic growth, with drivers being gender equity and mainstreaming, governance and capacity development, knowledge solutions, and fostering partnerships.

“Pakistan is highly vulnerable to climate change, with water resources and energy particularly at risk from floods, droughts, high temperatures, and other extreme weather events,” said ADB Principal Energy Specialist Adnan Tareen. “In line with Pakistan’s climate change adaptation and mitigation priorities, this climate-resilient hydropower plant will boost the country’s clean energy generation while effectively utilising its vast water resources.”

Pakistan is rich in hydropower resources but only around 16 percent of its identified hydropower potential has been harnessed. The country’s power sector was reliant on imported fuel-based power generation, and burdened with a stressed transmission and distribution network. To balance the energy mix and reduce its dependence on imported fuel, the government has committed to increase its untapped renewable energy potential in hydro, solar, and wind.

Balakot Hydropower Plant would also generate economic activity and improve the skills of local communities. During construction, the project would generate more than 1,200 jobs, about 40 percent of which would be sourced locally, and provide livelihood skills development for women.

A community development programme would help to improve livelihood opportunities for affected households and adjacent communities, including women and vulnerable segments of the population. This would help to build economic resilience and improve the capacity of affected people to cope with climate change, natural disasters, and other risks.