Neelum-Jehlum financing hits

Foreign fanciers’ reluctance to release committed funds has risked timely completion of 969 megawatt (MW) Neelum-Jehlum Hydropower project (NJHPC) facing Rs 90 billion shortfall as 59 per cent physical work is still pending. Both the notable external financiers namely Export Import (Exim) Bank of China (committed $448 million) and Abu Dhabi Fund ($100 million) had been dillydallying on the release of funds they had agreed to contribute to the critical project in the wake of growing electricity shortfall in the country. China had refused funding for the ongoing Neelam-Jhelum Hydro Project (NJHP), saying that the issue would be decided after the lifting of (Supreme Court’s) ban on “Safe-City” project tenders.
A private TV channel reported that Pakistani officials even held a meeting in the previous week with the Chinese Commercial Council, who had stressed on starting the “Safe City” project by favoring the ‘approved’ company with tender(s); if Pakistan wanted its funding worth $.4.48 million for the Neelam-Jhelum Hydro Project. It is pertinent to remember that Pakistan faced a shortfall of $.5.48 million for the Neelam-Jhelum project, and any hassles in funding could delay the worthy project which would start in 2016 and end late in 2018. Any such delay would also increase its expenses, which had already shot up by Rs. 275 billion.
According to the document available with this agency, Exim Bank was waiting for a final approval from the China State Council while the Abu Dhabi Fund was holding back its commitments for not so clear reasons. It hinted that the Fund was trying to link the Neelum-Jehlum financing with some previous United Arab Emirates (UAE) investment facing settlement issues. Previously, Abu Dhabi had conditioned its $.100 million loan to $.8 million worth of privatization. “Therefore, NJHPC had not been able to open the Letter of Credit(LC) of US$ 113 million, for Islamic Development Bank(IDB) financed equipment,” the document said. “The Company managing the project would not be able to open the letter of credit unless the co-financing agreements are signed with both the Exim Bank of China and the Abu Dhabi Fund,” the document reveals. According to the document the revised total cost of the Neelum-Jehlum project without interest during construction was $2583.43 million and the total financing and requirement from local source was $1291.71 million each. The surplus deficit of Rs.90 billion of the Neelum-Jehlum Project would be met through 50 per cent government’s share and the remaining 50 per cent would be met with foreign loans. It further mentioned that the feasibility in detailed engineering design was completed in 1997 as per seismic parameters established before the earthquake of 2005.After the earthquake revised PC-1 of the project escalated to Rs.274.882 billion recommended by Central Development Working Party (CDWP) for Executive Committee of National Economic Council (ECNEC) approval on 18th June, 2012 whereas the original PC-1 was approved in 2002 for an amount of Rs. 84.502billion.
According to technical experts, a better way to get this project completed was to form a commercial consortium that could build the dam on Build Own and Transfer (BOT) basis. They referred to estimated annual revenue Rs 45 billion once the project was complete. It clearly indicated that the total cost of the project Rs 274.882 billion was recoverable even on the existing electricity prices within five to six years. For that, they mentioned, the government needed to have an independent hydropower generation policy to encourage private investment in this field. According to the experts, the German think tank GTZ had already pointed out as much as 45,000 MW potential of the Indus River alone in case an independent hydropower generation policy was put in place in Pakistan.