THE first-ever independent power producer (IPP) of hydropower project has finally achieved the financial close. The ground-breaking ceremony of the new Bong Escape project of 84 MW capacity, sponsored by Laraib Energy Ltd, is scheduled this month.

The project is a run-of-the river, low-head hydropower project, located on the Jehlum Road, about seven km downstream of Mangla Dam. It will not involve construction of a dam or reservoir, nor will it affect the existing water management regimes.

The $216 million project is expected to achieve commercial operations in the year 2011, generating 540 GWh electricity annually. In August 2008, the Hub Power Company (HUBCO) acquired major shares of Laraib Energy Ltd, now its subsidiary. Apart from the local commercial banks, the project is being co-financed by the Asian Development Bank (ADB) and the Islamic Development Bank (IDB.

The project was sanctioned in 1995-96 but faced numerous problems in the initial stages. The foremost was that of tariff that was initially determined at US cents 3.103/kWh. By all standards, international as well as local, it was considered a low tariff and the project could not attract the requisite financing.

With the active intervention of the PPIB, however, the major concession was given by the government to allow tariff methodology under the Power Policy 2002, on a cost plus basis. Consequently, tariff was revised again. The project will prove to be a precursor of other IPP hydropower projects that are currently at different stages of processing.

Of the country's total installed power generation capacity, the share of hydropower is about 32 per cent with an installed capacity of 6,493 MW connected to the national grid. The country has huge under-developed water power resources with a potential of an additional 36,785 MW hydropower. This is in addition to the projects under construction in public sector, of cumulative capacity of 1,489 MW and a large number of projects under implementation, with a cumulative capacity of 8,347 MW, in private and public sectors.

Resultantly, the government plans to add 13,530 MW hydropower to the national grid by the year 2020, pursuant to the National Energy Security Plan, retaining its present share in the overall energy mix of 72,270 MW targeted by then. Private Power and Infrastructure Board (PPIB) has played a significant role in evolving power policies for the IPPs, now with renewed emphasis on hydropower projects. In all, 18 projects of cumulative capacity of 5,164 MW, on BOT basis, are in different stages of processing.

Under the 1995 Hydro Policy, the PPIB has processed two projects--- New Bong Escape of 84 MW capacity and Rajdhani of 132 MW to be located on Poonch River. Tariff negotiations are being held for Rajdhani project, which is scheduled to achieve commercial operations by the year 2014. The PPIB is processing 14 other projects of cumulative capacity of 4,935 MW under Power Policy 2002.

Feasibility studies have been completed/approved for Kotli of 100 MW, Golpur of 100 MW and Patrind of 150 MW capacity, all to be located in the Azad Jammu and Kashmir (AJK). National Electric Power Regulatory Authority (NEPRA) has already determined the first stage tariff for these projects based on the approved feasibility studies, whereas selection of the EPC contractors by the respective investors is in progress. The projects are expected to come on stream by 2014.

In addition, feasibility studies for Kerot hydropower of 720 MW and Azad Pattan of 222 MW capacity have been recently approved by the PPIB. Two other projects i.e. Sehra (130 MW) and Chakothi Hattian (139 MW) in the AJK are at feasibility stage. Kohala mega hydropower project, of 1,100 MW capacity, is of great national importance, for which the feasibility study is being revised.

Another six projects of cumulative capacity of 2,058 MW are proposed to be located in the NWFP. On completion of feasibility study, Nepra has determined the first stage tariff for Suki Kinari of 840 MW capacity and issued generation license to the investors. Located on Kunhar River in Kaghan, the project is expected to commence power generation in 2017. In addition, feasibility studies have been carried out by the investors fo Kalam-Asrit of 197 MW, Madyan of 157 MW and Asrit-Kedam of 215 MW capacity, all to be located on Swat River. The later two projects are at the stage of tariff negotiations with the Nepra.

Detailed studies for the development of Gabrial-Kalam (101 MW) and Kaigah (548 MW) are in progress. Also, preparation of feasibility studies have been undertaken by the PPIB, under the ADB financing, for another two projects; namely Shogosin of 127 MW and Shushgai-Zhendoli of 102 MW capacity, both to be located in Chitral. After finalisation of the respective studies, the two projects will be offered to the prospective investors on international competitive bidding (ICB) basis.

The development of hydropower has special characteristics, complex and its cost extensive, having a long gestation period. Private sector investors have not been attracted in the past to set up hydropower stations.. There are a variety of factors, like hydrological risks, location in far-flung areas, constraints of infrastructure, resettlement issues, resistance of locals and political issues etc, which have so far inhibited the development of hydropower projects, in particular in the private sector.

The PPIB has taken special measures to remove other impediments in development of hydropower projects by revising the security package documents, taking all stakeholders on board. These measures are likely to go a long way in expeditious development of these projects in private sector. Hydropower, the leading source of renewable energy, can be sustained as the principal energy in future. There is however the need for the government to implement investor- friendly policies, which should also be integrated in overall energy plan and will remain consistent on long-term basis.

Engr Jawaid Iqbal Mufti is retired Wapda chief engineer of Tarbela and Mangla hydropower stations and Engr Hussain Ahmad Siddiqui, retired chairman of State Engineering Corporation