Govt projects $2 billion in external financing for power sector by 2027

The government has projected $2 billion in external financing for the power sector from international financial institutions over the next three years (2024-27). 

According to a news report, the funding will come from the Asian Development Bank (ADB), World Bank, Islamic Development Bank (IsDB), Korean EXIM Bank, and the Kuwait Fund for Arab Economic Development (KFAED).

For the Power Distribution Strengthening Project-1, ADB will provide $400 million in OCR (Ordinary Capital Resources) funding during 2024-25. 

This project aims to modernise the transmission and distribution system and implement revenue collection measures through the Asset Performance Management System (APMS) in HESCO, LESCO, MEPCO, and SEPCO. The project’s scope has been finalized, and the PC-1 preparation is in progress in consultation with the four DISCOs.

ADB will also extend $14.8 million for the Pattan Hydropower Project Readiness Financing (PRF) under Concessional OCR Lending to update the feasibility study and prepare detailed engineering design, tender documents, and PC-1 for constructing the Pattan Hydropower Project (400 MW). 

In 2025-26, ADB will provide $200 million in OCR Result-Based Lending (RBL) for the second access to clean energy investment program in Sindh and Punjab. 

For 2026-27, ADB will provide $200 million in OCR funding for the second power transmission network by constructing a new 500 KV DC transmission line from Matiari to Rahim Yar Khan and installing reactive compensation devices in selected substations. 

The World Bank will provide $340 million in Investment Project Financing (IPF) for a floating solar project generating 300 MW in the Tarbela-Ghazi Complex and 25 MW in the Tarbela reservoir. 

The World Bank is also expected to approve $350-400 million in financing for the National Transmission Modernization Project Phase-II in 2026. 

IsDB will offer loans of $140 million for the Mohmand Dam Evacuation Project and the second power transmission strengthening project. 

Korean EXIM Bank is likely to extend a loan of $165 million for the Swat Mingora Transmission Line over three years. The Pakhtunkhwa Energy Development Organization (PEDO) is constructing hydropower projects in Swat, which will connect to the national grid through this transmission line.

KFAED will also provide a loan of $100 million for the construction of the Mohmand Dam Hydropower Project, with the first agreement of $25 million expected to be signed during the current fiscal year.

Additionally, the Saudi Fund for Development is expected to provide financing for the Diamer Bhasha Dam Project. A project brief and PC-1 for the power generation component of the Diamer Bhasha Hydropower Project were shared with SFD on August 17, 2023, and a response is awaited.