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Land acquisition for Bhasha dam may be completed before June

Land acquisition for Bhasha dam may be completed before June

ISLAMABAD: The government is expecting to complete acquisition of land for the multi-billion-dollar Diamer-Bhasha dam before June this year.

A senior official told Dawn that Rs10 billion had been allocated under the current fiscal year’s Public Sector Develop­ment Programme and the amount had been released to the Water and Power Development Authority (Wapda) to complete the process of land acquisition for the storage-cum-power generation project.

He said Wapda had transferred Rs10bn to the deputy commissioners of Gilgit-Baltistan and Khyber Pakhtunkhwa to be paid to the people who would be displaced from the required land.

The official said that most of the land needed for the project had already been acquired and land titles transferred/registered. The remaining work is expected to be taken over in two to three months.

He said land acquisition was the first requirement for raising local and international financing for the $14bn project. About 37,500 acres has to be acquired, including about 18,500 acres of private land. All paper work has been completed to formally seek financing from international agencies and bilateral lenders.

Multilateral institutions, primarily the Asian Development Bank, have advised the government to adopt a professional approach for building the big dam which no single institution, country or group can finance given its mammoth funding requirements and the risks involved.

About 80 per cent of the required financing — more than $10bn (Rs1.1 trillion) — will have to be raised through external sources and the remaining through domestic arrangements. While a part of the external financing can be arranged by a few institutional lenders, the major financing will have to be received from the international capital market as a specific infrastructure bond in the name of Diamer-Bhasha Dam Company (DBDC) — a special purpose vehicle.

The government has been soft-marketing the project in the United States, Europe and the Middle East for two years. This will be the largest water sector project to be undertaken in more than 40 years.

Based on market and domestic circumstances, the DBDC will be offered to international investors early next fiscal year with a targeted completion date of June 2024. To meet the deadline, the DBDC will be built on the pattern of the Neelum-Jhelum hydropower project through transfer of cost of land of the dam and operating assets of 1,450MW Ghazi Barotha hydropower project (GBHP).

After clearance by the Economic Coordination Committee of the cabinet, a special request will be sent to the National Electric Power Regulatory Authority (Nepra) for amendments to the generation licence of Wapda and for issuance of a separate generation licence to the DBDC for a fresh power purchase agreement with the National Transmission and Dispatch Company.

GBHP’s revenue surplus of about Rs9bn per annum and net worth of about $500 million is not sufficient to meet local financing requirements.

Therefore, a special cess on the pattern of Neelum-Jhelum surcharge on electricity tariff will be imposed on GBHP’s tariff which can range between Rs10 and Rs15 per unit to make the DBDC project attractive for investors.

There is a move to increase GBHP’s tariff to Rs23 per unit by loading on the project cost of DBDC because a combination of operation and development activities will not be attractive for short-term investors.

The approach is being adopted to sidestep the existing lengthy mechanism of involving private investors in bidding for such a mega infrastructure, involving many approvals, tariff setting and construction. Instead, the project development will be fast-tracked through public-private partnership during its execution by completing an updated feasibility study, environmental impact assessment and land acquisition.

An international panel of experts would be set up for selection of bidders through international competitive bidding, and the predetermined upfront tariff and PPA period and completion deadline will be set in the expression of interest.

The official estimate put return on equity at 17pc based on a 30-year average tariff of about Rs7.75 per unit.

Published in Dawn, January 8th, 2016

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