ADB signs $300mln loan deal with govt for Balakot project

ISLAMABAD: The Asian Development Bank (ADB) and the government of Pakistan on Friday signed a $300 million loan to finance the construction of a 300 megawatt hydropower plant in Balakot, Khyber Pakhtunkhwa province.

ADB Acting Country Director Cleo Kawawaki and Secretary of the Economic Affairs Division Noor Ahmed signed the loan agreement for the project, which was approved by ADB on March 30. Minister for Economic Affairs Omar Ayub Khan, Khyber Pakhtunkhwa Chief Minister Mahmood Khan, and ADB Director General for Central and West Asia Yevgeniy Zhukov witnessed the ceremony.

Total cost of this project was $755 million, out of which ADB has committed to provide $300 million, while Asian Infrastructure Investment Bank would provide $280 million. For this project, ADB is providing financing at highly concessional rates ie LIBOR (6-Month) + 0.5 percent per annum (currently 0.7 percent per annum) for a period of 27-years, including a seven-year grace period. Omar Ayub Khan said, “The government is working on renewable energy policy to harness immense potential in solar, wind and hydel resources and have good opportunities for investments.”

This run-of-river hydropower project would be constructed on Kunhar River in District Mansehra to generate 300MW electricity. Balakot Hydropower Project will not only help unleash hydropower potential of the country but also improve energy security by increasing clean and affordable energy share in the country’s energy mix.

The minister appreciated the ADB’s valuable support for financing this highly important project.

“As Pakistan’s largest development partner in the energy sector, ADB has been supporting Pakistan as it aims to build its renewable energy resources and cut its heavy dependence on fossil fuels,” said Zhukov. “The Balakot hydropower project will play an important role in helping to advance this objective. ADB will continue to support Pakistan to diversify its energy sources, implement critical reforms, increase energy security, and grow the share of clean power in its energy mix.”

Khyber Pakhtunkhwa CM Mahmood Khan said his government was working on development of hydropower potential of the province on fast track-basis. He mentioned that PTI government was already making huge investments in development of various hydro sites in the province.

The Balakot hydropower project would 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. A community development programme would help to improve livelihood opportunities for affected households in the project surroundings. The project will help meet future national demand for clean and affordable energy and generate revenue for Khyber Pakhtunkhwa province. It is expected to be commissioned by 2027. The Energy and Power Department, Khyber Pakhtunkhwa would be the executing agency, while Pakhtunkhwa Energy Department Organization (PEDO) would be the implementing agency for the project.

ADB has helped Pakistan undertake wide-ranging energy sector reforms designed to boost generation, transmission, and distribution capacity by rehabilitating aging power infrastructure. ADB is also supporting energy efficiency initiatives and public and private sector-led clean energy development projects.