ISLAMABAD, Aug 8: The Water and Power Development Authority (Wapda) has set up the Neelum-Jhelum Hydroelectric Project Company (NJHPC) as a special purpose vehicle (SPV) to raise about Rs50 billion for the 969MW project in Azad Kashmir for protecting Pakistan’s priority rights over the Neelum River.
A senior Wapda official told Dawn that the estimated cost of the project on its completion was expected to increase by 41 per cent to $2.14 billion, although its contract had been awarded to a Chinese consortium, comprising China Gezhouba and the CMEC China, at Rs90.90 billion ($1.5 billion).
He said a meeting presided over by Minister for Water and Power Liaqat Ali Jatoi was informed on Tuesday that the NJHPC had been registered with the Securities and Exchange Commission of Pakistan as an SPV to raise about half of the project cost in foreign exchange through bonds and loans.
The company will be run by a seven-member board of directors led by Wapda Chairman Tariq Hamid.
The remaining amount – half of the project cost – will be provided by the federal government. The official said a lot of efforts made by Wapda and the federal government could not succeed in arranging foreign exchange component of the project cost and hence the new project company was established for the purpose.
Based on the bid price of $1.5 billion (Rs90.90 billion), the actual project cost phasing over a period of eight years would in effect reach Rs128.4 billion ($2.14 billion) on completion. This also included interest payments of more than Rs29 billion, he said.
The plan also suggests that the final cost of the project will be more than 105 per cent higher than Wapda’s contract estimate of Rs62.25 billion ($1.04 billion).
The government has released Rs5 billion as mobilisation advance to the executing agency to start the project without further delay. Pakistan will need to spend $87 million for the start-up operations in the first year of the project’s implementation.
On completion, the project will generate electricity at a cost of Rs1.91 per kilowatt hour (unit), which is much higher than the engineers’ estimate of Rs1.42 per unit, but significantly lower than the tariff currently being offered by the government for thermal power projects.
According to Wapda’s cash plans, the project will require $125 million (Rs7.5 billion) in the second year of implementation, followed by another $235 million (Rs14 billion) in the third year.
In the fourth year, Wapda will spend $271 million (Rs16.3 billion) and $382 million (Rs23 billion) in the fifth year. In the sixth year, $444 million (Rs26.6 billion) will be spent on the project and then about $348 million (Rs21 billion) in the seventh year.
In the final year of implementation, the project will eat up another $248 million (Rs14.8 billion), leading the total cost of the project to $2.14 billion (Rs128.37 billion), although the bid quoted by the lowest contractor is Rs90.9 billion.
The fate of the 969MW Wapda project has been hanging in balance for eight years although it is considered crucial to secure Pakistan’s priority rights over Neelum waters – a tributary of the Jhelum River – threatened by the Indian move to use its waters for power generation and diversion.
Bidding for the project was held about a year ago. Wapda received three bids for the project. The lowest $1.3 billion bid given by the Chinese consortium was recommended by Wapda to the federal government for approval.
The project has already been delayed by more than eight years because of lack of public sector allocations for the project. Several rounds of bidding were held and cancelled for one reason or the other. The project should have been started in 1999 as originally planned. It is estimated to take at least eight years for completion.
Pakistan had stopped India more than a year ago from completing a 22km tunnel that sought to construct a storage-cum-power project and divert Kishanganga (Neelum) waters to Wullar Lake in violation of the Indus Waters Treaty 1960.
Later, India offered to alter its project design but Pakistan rejected that plan as well. Like the Chenab, the Jhelum River of which Neelum is an integral part, belongs to Pakistan under the 1960 treaty.
Under the treaty, India could not change the flow of the Jhelum River even for power generation that may affect any Pakistani power project. But if Islamabad fails to construct the project and there is no power project in Pakistan for that particular river, India could divert the river for run-of-the river project but without any storage.
Under the treaty, Pakistan has exclusive rights to use water of western rivers – Indus, Jhelum and Chenab – and eastern rivers – Ravi, Sutlej and Beas – have been assigned to India.