The cost of Tarbela-4 Extension will be shifted from $928 million to $807 million. The saving will be used for contractors early payment in next phase. Both extensions have capacity of 1410MW each. World Bank provided $840 million in T4HP and AIIB US$300 million.
The World Bank has restructured “Tarbela Fourth Extension Hydropower Project (T4HP)” which will cancel Special Drawing Rights (SDR) 22.86 million (USD 30.4 million equivalent) from IDA Credit. T5HP is expected to be commissioned in July-August 2025.
IBRD Loan (costly loan) and IDA Credit (cheaper loan) also finance technical assistance, training, and preparation of strategic projects. This restructuring proposes the cancelation of SDR 22.3 million from the IDA credit, which are additional savings in the T4HP.
IBRD Loan-86460 finances a 500kV transmission line from the switchyard to the Islamabad West substation. AIIB has extended the closing date of its loan to IBRD to June 30, 2025. An additional extension of the loans will be necessary to complete the construction and commissioning of T5HP.
T4HP was commissioned in 2018 and has since generated over 15,500 Giga Watt-hours (GWh) of sustainable energy. The plant was completed with cost savings of 10 percent, rare for a large hydropower project.
In T5HP, the key contractors for civil works and electro-mechanical (E&M) works have been mobilized. Under civil works, the contractor has been excavating the sites for raised intake, penstock, powerhouse backslope, and tailrace canal.
Rationale for Cancellation of IDA Credit
About $30.4 million (equivalent to SDR 22.86 million) will not be utilized under the proposed restructuring. The proposed restructuring will cancel these savings from the IDA Credit, as requested by EAD. WAPDA will utilize the remaining IDA credit to complete the T4HP activities and contingencies.
The Rationale for Changing Co-financing From IBRD Loan
The challenging macroeconomic situation of Pakistan, especially the limited availability of foreign exchange reserves, can delay foreign currency payments from WAPDA to the key contractors. Changes in the share of co-financing have been requested by W APDA and EAD to avoid any delays in payment to the contractors.
AIIB task team has agreed to increase their share of co-financing to 50 percent to cover the remaining expenditures on Category 1 and 2. This restructuring also proposes an amendment in the IBRD Loan Agreement to cover 100 percent of expenditures under Category 3 from August 22, 2022, onward.