Korean firms to invest $3 billion in hydropower projects

September 7, 2012

ISLAMABAD: In a step towards the setting up hydropower projects in Pakistan, Korean firms have been selected to construct two mega hydropower projects. These are the 665MW Lower Palas Valley project and the 496MW Lower Spat Gah project, with a cumulative generation capacity of 1,161MW in a public private partnership, said a senior official.

“The Korean firm K-Water will construct the Lower Palas Valley Hydropower Project while a consortium of two other Korean companies, namely Komipo and Posco, will implement the Lower Spat Gah Hydropower Project,” said the official.

The Korean firms, he said, will bring in an investment of approximately three billion dollars for the construction of these projects with $1.6 billion for the Lower Palas Valley project and $1.4 billion for the Lower Spat Gah project.

Wapda chairman Shakil Ahmad Durrani confirmed that the Korean firms would invest three billion dollars in the two projects. He said that this demonstrates the level of confidence reposed in Wapda by financial institutions regarding the implementation of projects.

A formal agreement between the government of Pakistan and the Korean firms will be signed in a few weeks. “This will be the first time in the history of Pakistan that hydropower projects of such magnitude will be constructed in a public private partnership,” said Durrani. “This will open a new window of opportunity regarding financial arrangements for other hydropower projects,” he said.

As per details of the financial arrangements, 80 percent of the cost of these two projects will be funded through debt arranged by the Korean firms. The remaining 20 percent will be in the form of equity, a quarter of which will be arranged by the public sector, including the Khyber Pakhtunkhwa government and Wapda while the remaining will be arranged by the Korean firms.

Wapda completed feasibility studies for these hydropower projects in 2010 with the help of a grant provided by KfW, Germany. Subsequently, Wapda initiated the process to construct the two projects and selected the Korean firms through international competitive bidding. Now the projects are being handed over to the Private Power and Infrastructure Board (PPIB) for implementation.

Lower Palas Valley Hydropower Project is located on the left tributary of River Indus, 335 kilometres from Islamabad, in Kohistan district of Khyber Pakhtunkhwa.

Lower Spat Gah Hydropower Project is also located on a left tributary of River Indus some eight kilometres downstream of Dasu town and 365 kilometres from Islamabad in District Kohistan. The two projects, scheduled to be completed in six years, will contribute more than 4.7 billion units of low-cost electricity to the national grid annually. The cumulative annual benefit of the projects has been estimated at Rs47 billion.