World Bank approves additional $300 million for Tarbela hydropower project

The World Bank has approved an additional $300 million in financing for the Tarbela Fourth Extension Hydropower Project (T4HP) to help cover cost overruns associated with the under-construction Tarbela Fifth Extension Hydropower Project (T5HP).

According to official sources, the government requested the additional financing, which will serve as the final tranche of World Bank investment for the project and support the completion of outcomes envisaged under T5HP.

The 1,530-megawatt Tarbela Fifth Extension Hydropower Project is at an advanced stage of construction, with commissioning of its generating units expected in July 2027.

Project documents state that completion of T5HP is critical for the safe operation of Tunnel 5 and the Tarbela Reservoir, a key component of Pakistan's irrigation and power generation system.

The project includes the construction of a 1,530MW hydropower facility and a raised intake structure in Tunnel 5 of the Tarbela Reservoir. It also includes a 500-kilovolt double-circuit transmission line connecting the project's switchyard to the Islamabad West Substation, along with associated interconnections within the Tarbela power complex.

The hydropower component is being implemented by the Water and Power Development Authority (WAPDA), while the transmission line is being executed by the National Grid Company (NGC), formerly the National Transmission and Despatch Company (NTDC).

Existing financing for T5HP includes a $390 million loan from the International Bank for Reconstruction and Development (IBRD), approved in 2016 as additional financing under T4HP, and a co-financing loan of $300 million from the Asian Infrastructure Investment Bank (AIIB), along with WAPDA's equity contribution.

According to project documents, costs increased due to higher inflation, additional civil works requirements, rehabilitation and replacement of Tunnel 5 gates, and interest accrued during construction.

The original T4HP project financed a 1,410MW powerhouse and modifications to Tunnels 3 and 4 at Tarbela. The project was completed in 2018 and has been operational since then. Financing for T4HP included a $400 million IBRD loan and an International Development Association (IDA) credit of SDR283.7 million, both of which were fully disbursed and closed by June 2023.

The World Bank noted that T5HP was among the first projects in Pakistan to receive joint financing from the World Bank and AIIB. The AIIB approved its $300 million loan in September 2016.

In addition to construction works, the IBRD financing supports environmental and social management plans, project supervision, technical assistance, audits, an Independent Panel of Experts, a floating solar pilot initiative and preparation of future projects.

The closing date for the World Bank's IBRD loan has been extended to September 30, 2027, while AIIB has extended the closing date of its loan to June 30, 2028.