The Kohala Hydropower Project faces a significant hurdle as Chinese financiers have demanded the Rs350 billion backlog of outstanding payments to independent power producers (IPPs) under the China-Pakistan Economic Corridor (CPEC) be cleared before providing the required funding.
According to a senior Energy Ministry official, the new financing condition has virtually halted the project. The project costs $2.4 billion, with an estimated 30-year tariff of 7.85 cents per unit.
The Kohala Hydropower Company will develop the Kohala project, which includes China Three Gorges Corporation (CTG), the International Finance Corporation of the World Bank, and the Silk Road Fund, and will be located on the Jhelum River in Azad Jammu and Kashmir (AJK).
The official revealed that an Rs50 billion revolving fund had been set up to ensure smooth payments to Chinese IPPs under the CPEC umbrella. Still, it remains unclear whether China is satisfied with this arrangement.
The financial closure of the project has not been achieved, and the official suggests that the project’s completion by June 2026 seems unlikely, given Pakistan’s current financial constraints and the US dollar liquidity crunch. Moreover, despite the outstanding payments, Chinese power producers have not yet invoked the sovereign guarantees of Pakistan’s government.
Shah Jahan Mirza, Managing Director of the Private Power & Infrastructure Board (PPIB), confirmed that Chinese state-owned banks and Sinosure (China Export & Credit Insurance Corporation) had delayed the decision to finance the Kohala Hydropower Project. However, he attributed the delay to the increased country risk factor after global rating agencies downgraded Pakistan’s credit rating due to its challenging economic situation. Mirza did not comment on the linkage between the financing and the clearance of dues to CPEC IPPs.
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