Pakistan's BRI-Backed Karot Hydropower Project Set for 2021 Turn-On

Once completed, US$1.74 billion project will provide electricity for more than seven million households.

Photo: The Karot Hydropower Project: The first BRI development to be backed by the Silk Road Fund.
The Karot Hydropower Project: The first BRI development to be backed by the Silk Road Fund.
Photo: The Karot Hydropower Project: The first BRI development to be backed by the Silk Road Fund.
The Karot Hydropower Project: The first BRI development to be backed by the Silk Road Fund.

Construction of the Karot Hydropower Project in Pakistan will be completed in two years, with power generation commencing in April 2021, according to the China Three Gorges Corp (CTGC), the project's Beijing-headquartered development partner. A landmark Belt and Road Initiative (BRI) project, it is the first to be funded by the US$40 billion Silk Road Fund, a China-backed investment body established to support the country's ambitious international infrastructure development and trade facilitation programme.

The $1.74 billion Karot Hydropower Project is the fourth of five cascade hydropower stations planned for the Jhelum River. It will generate 3,174GWh (net) of energy a year, which will be sold to the National Transmission and Despatch Company under a 30-year power-purchase agreement.

The dam will be about 95m high and stretch for 460m across the river, while the reservoir created will extend 27km upstream and the surface powerhouse, consisting of four turbines, will be situated approximately 650m downstream of the dam crest. The project specifications also cover four 316m headrace tunnels, a spillway, three 447m diversion tunnels and coffer dams upstream and downstream of the main dam. Once online, it is estimated that the power generated will be sufficient to run approximately seven million households.

The project is managed by the Karot Power Company (KPCL), a special-purpose vehicle established by Pakistan-based Associated Technologies and China Three Gorges South Asia Investment (CSAIL), with the latter responsible for about 93% of the project's funding.

CSAIL is already a big player in Pakistan's energy sector. It currently has five greenfield investments in Pakistan, all of which are clean-energy projects, including hydro and wind power, with a total installed capacity exceeding 2.6 million kW. According to the company, it accounts for about 9% of the country's current installed electricity capacity.

Financing for the Karot project has been arranged on the basis of 20% equity and 80% debt. In addition to the Silk Road Fund, among the other key financing participants is the International Finance Corporation (IFC), which has provided $100 million. The Export-Import Bank of China – the lead player in the consortium – and the China Development Bank are also scheduled to extend loans to the Karot Power Company.

The participation of the IFC has added to the project's credibility and provided reassurance that it will address a number of environmental concerns. The original project environmental impact assessments were conducted and approved in 2010 and 2011. In its own evaluation of the project, the IFC conducted a further environmental and social-impact assessment report and identified a number of further provisions that needed to be put in place in order to bring the project up to the required standards.

Aftab Alam, Senior Manager of Environment for the project's Social and Safety Department, said the IFC, as a member of the World Bank Group, has done all it can to ensure the project meets all international standards relating to a safe work environment. Quarterly monitoring by third-party consultants is also being carried out in order to assess any potentially negative environmental impact.

Once completed, it is hoped that the project will help to significantly remedy Pakistan's chronic power supply shortage. Located on the Jhelum River in northeastern Pakistan and just 55km from Islamabad, the country's capital, the 720MW project will generate about 3.2 billion kWh of power annually, equivalent to about 10% of the country's total hydropower output in 2017.

In addition to the much-needed increase in power, the project is also expected to pay $23 million in taxes to the government and provide more than 2,200 jobs for local workers during the peak construction period, as well as about 3,500 regular jobs over the long-term.

Geoff de Freitas, Special Correspondent, Islamabad