Govt plans to give Ghazi Barotha project’s 30% equity for Diamer-Bhasha Dam financing

• Plan to generate $800m for Diamer-Bhasha Dam financing.
• Army chief asks SIFC to take up plan for positive consultations.
• Divestment of project based on profit sharing basis: source.

ISLAMABAD: The government has worked out a doable and unique strategy under which it will dole out 30% equity of the Ghazi Barotha Hydropower Project (GBHPP) to generate $700-800 million for financing the Diamer-Bhasha Dam.

To this effect, Chief of Army Staff (COAS) Gen Asim Munir has been sensitised and asked the Special Investment Facilitation Council (SIFC) to take up this plan for positive consultations between stakeholder entities. The equity will be sold out to potential investors from friendly countries for 10 years, top officials told The News.

“The divestment of 30% equity of the Ghazi Barotha Hydropower Project would be based on profit sharing basis,” official sources said, adding that the caretaker federal minister for water resources earlier briefed Gen Asim Munir about the divestment of 30% equity plan of GBHPP worked out by the Technical Wing of Water Resources Ministry. 

He appreciated the plan and its proposed execution and asked the SIFC to start consultations on this unique plan with the Power Division, Finance Division and Nepra.

The Ghazi Barotha Hydropower Project is the golden goose as it continues to generate electricity in the summer and winter seasons with an average hydro generation of 800 MW. 

The project has the capacity to generate 1,450MW and 1,450MW in the summer, but in the winter, the generation of electricity fluctuates depending on water flows in the Indus River downstream of Tarbela Dam. However, during the peak time in the ongoing winter season for four hours, the project still generates 1,450MW.

The GBHPP produces 6.7 billion units in a year and the government would sell out electricity directly to the export industry of the country under the CTBCM model 450 MW, which is 30% of the total hydro generation of the project. 

This is how this would be the pilot project that will provide electricity to the export industry by using the transmission and distribution system of NTDC and relevant DISCOs. This will reduce the current tariff of the export industry manifold which will help reduce the input cost of the industry and boost exports of the country.

The tariff for the hydropower project currently stands at Rs1.25 per unit, but the Water and Resources Ministry wants Nepra to increase its tariff to Rs10 per unit as a base tariff for 30% generation of the project; it is enough to generate ample attraction to potential investors from friendly countries i.e. Qatar, Kuwait, UAE and Saudi Arabia. 

If the regulator increases its tariff up to Rs10 per unit, the 30% equity would generate $700-800 million and if it increases to Rs20-25 per unit, doling out the 30% equity would fetch $1.6-1.8 billion.

However, under the plan, the authorities want Nepra to increase the base tariff of 30% generation of the GBHPP up to Rs10 per unit. After that, the government would hold competitive bidding between export sector players seeking tariff rates above Rs10 per unit. If it gets implemented, it will be a win-win situation both for the export industry and Ghazi Barotha Hydropower Project management and foreign investors.

However, the Power Division showed reluctance to the proposal during the consultation process, arguing that the export industry was providing a massive cross-subsidy to residential and agriculture consumers at about Rs10.85 per unit under the current tariff regime, which will come to an end if the said plan is implemented under the CTBCM model. 

More importantly, NTDC is seeking wheeling charges or transportation charges of electricity at Rs27 per unit and that is meant to fail the CTBCM model.

Originally published in The News