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Factsheet February 25, 2020

Tarbela Fourth Hydropower Extension Project (T4HP)

What is the Tarbela Fourth Hydropower Project?

The objective of the Tarbela Fourth Extension Hydropower Project (T4HP) is to add 1,410 Megawatt (MW) of renewable and low-cost electricity to Tarbela Dam’s generation capacity during the high-demand summer season. The project has installed a power plant of 1,410 MW on the fourth tunnel at Tarbela Dam. The Tarbela Fifth Extension Hydropower Project will install an additional power plant at Tunnel 5. This is expected to bring total generation capacity of Tarbela to 6,298 MW (nearly 20 percent of current installed capacity in the country).

What is the importance of both projects?

The Government has decided to move to a renewable energy reliant economy by 2030 in which hydropower will be the backbone. To keep pace with the demands of a growing economy, this would require the development of additional generation capacity of 20 GW of hydropower, wind and solar. T4HP is an important part of this transformation away from high-cost inefficient thermal to low-cost renewable energy. T4HP has increased the supply at competitive prices from Tunnel Four, reducing load shedding and contributing to long-term energy security.

How much has the project contributed since its implementation?

The T4HP became operational in 2018 and has since generated over 6,200 GWh of electricity benefiting millions of people. The achievements under T4HP are impressive – the power plant at Tunnel 4 was completed on time and at a lower cost, and resulted in foreign exchange savings. Moreover, the revenue earned by WAPDA from the sale of electricity has already exceeded the cost of the T4HP investment. Also, the Project modified intakes of Tunnel 3 and Tunnel 4 and raised them to a higher elevation to protect against sedimentation in the reservoir. This has increased the lifespan of the power house on Tunnels 3 and 4, which otherwise would have been inoperable due to deposits of sediment.

What are the challenges for the project?

Construction on an operational dam is complex and requires careful planning to avoid any disruption to on-going operations. WAPDA continues to play an important role and has managed the project efficiently, including the selection and management of international firms, leading to improved tendering and contract management processes in other projects.

Was the project finished on time?

Construction works under T4HP were completed on time and met the target generation of 1,500 GWhs in 2018.

What is the financing arrangement for both projects?

The project was financed with a US$400 million IBRD loan and a US$324.93 million equivalent IDA concessional credit in March 2012. WAPDA financing was assumed as US$74 million equivalent, less than 10% of the project cost. Additional financing of US$390 million from the World Bank was approved in 2016 for the installation of a power plant at Tunnel Five and a 50-kilometer transmission line. These are jointly financed with US$300 million from the Asian Infrastructure Investment Bank (AIIB) who will be providing $300 million. These investments will be completed in three years.

Can interest during construction (IDC) be reduced in hydropower development in Pakistan?

IDC charged by the Government of Pakistan to WAPDA accounts for 34 percent of the project cost of T4HP and hence has a bearing on the tariff that is charged to electricity consumers. The World Bank financing carries an interest rate of between 1 and 3 percent, with a long-term maturity ranging between 20 and 30 years, hence providing concessional financing to generate low-cost energy. Therefore, it is important that the Government of Pakistan revisits its policy on IDC for hydropower projects to ensure affordable energy as Pakistan embarks on its aspiration to become a renewable energy reliant economy by 2030.

Some more facts about Tarbela Dam

Tarbela Dam is an earth-filled dam on the Indus River in Pakistan’s Khyber Pakhtunkhwa (KP) Province. It is the largest earth-filled dam in the world and also the largest dam by structural volume. The dam was completed in 1976 and was designed to store water from the Indus River for irrigation, flood control, and the generation of hydroelectric power.
The Tarbela Dam Project (TDP) was constructed as part of the Indus Basin Projects together with Mangla Dam and associated infrastructure connecting the Indus tributaries. TDP originally included two power tunnels and two irrigation tunnels on the right side of the dam (at Tunnels 1 to 4) and one irrigation tunnel (at Tunnel 5) and two spillways on the left side of the dam.

The expansion of Tarbela dam was designed in stages. In 1980, the first four units were added on Tunnel 1 with an installed capacity of 700 MW. The second extension increased this to 1,750 MW in 1985 through the addition of 6 units to Tunnel 2. The third extension, adding 3 units of 432 MW in 1993, increased capacity to 3,478 MW. In March 2012, a fourth extension was approved to install a power plant of 1,410 MW on the fourth tunnel. The power plant became operational in 2018, increasing the dam’s installed capacity to 4,888 MW. A fifth extension under implementation will finance the installation of a plant of 1,410 MW on Tunnel 5 and a 50-kilometer transmission line to transport electricity to the national grid. Once completed, the total capacity of Tarbela will be 6,298 MW.