Finance

Loan agreement signed for 800 MW Mohmand Dam hydropower project in Pakistan

Loan agreement signed for 800 MW Mohmand Dam hydropower project in Pakistan
(photo courtesy Kuwait Fund)

An agreement has been signed between the Government of the Islamic Republic of Pakistan and Kuwait Fund for Arab Economic Development to provide a loan of KWD7.5 million (US$24 million) for financing of the 800 MW Mohmand Dam hydropower project.

The project consists of construction of a hydropower scheme on the Swat River in the northeast of Pakistan. It comprises a concrete-faced rockfill dam with a height of about 213 m and a length of about 718 m, creating a reservoir with a total length of about 56 km, an area of about 24 km2, and a volume of about 1.6 billion m3. The scheme will include a powerhouse with four turbine-generator units with a total installed capacity of about 800 MW, capable of producing about 2,862 GWh a year. The Mohmand project will include flood protection, irrigation infrastructure and an intake for future drinking water facilities. The project also includes consultancy and project management services. The project is expected to be completed by Dec. 31, 2025.

The Mohmand project aims to support economic and social development in Pakistan by enhancing national energy generation from available hydro resources to meet increasing electricity demand, improve the region’s resilience to flooding, provide sustainable water resources for agriculture and drinking water for Khyber Pakhtunkhwa Province, and creating new job opportunities. The project is expected to contribute to the achievement of sustainable development goals, including no poverty; zero hunger; clean water and sanitation; affordable and clean energy; decent work and economic growth; industry, innovation and infrastructure; clean action; and partnerships for the goals.

The total cost of the Mohmand project is estimated at about KWD900.6 million ($2.9 billion). This loan covers about 0.83% of the project costs, in addition to the contribution of the Islamic Development Bank of about KWD56.3 million ($183.6 million), OPEC Fund for Development of about KWD22.5 million ($73.3 million), and Saudi Fund for Development of about KWD75 million ($24.4 million). The Pakistani government will cover the remaining costs or any other increase that may occur in the project costs.

The loan is for a term of 25 years, including a period of grace of about five years, and will be amortized by 40 semi-annual installments, the first of which will be due on the first date on which or any interest or other charges on the loan shall fall due after the elapse of the grace period. The loan will bear interest at 2% per annum in addition to a charge of 0.5% for meeting administrative costs and the expenses of implementation of the loan agreement.

The Kuwait Fund extends loans on concessionary term to finance development projects in developing countries. The fund also provides technical assistance to finance the costs of the feasibility studies of projects, as well as the training of nationals of the borrowing countries. In addition, the Fund subscribes in the capital of international and regional development institutions.