Making sense of Belt and Road – The Belt and Road project borrower: Karot Hydropower, Pakistan
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The first tangible progress in Belt and Road infrastructure can be seen in Pakistan. The China-Pakistan Economic Corridor has been valued at $62 billion of projects, from the seaport in Gwadar to the reconstruction of the Karakoram Highway across the Himalayas to the Chinese border.
the very first Belt and Road projects was the Karot Hydropower plant, a
720 megawatt run-of-river project on the Jhelum River, not far from
Rawalpindi and Islamabad. Karot is the first investment project to be
funded by the Silk Road Fund.
Silk Road is one of four known
lenders to the project, the others being the IFC, China Development Bank
and China Eximbank. The sponsor is China Three Gorges South Asia
Investment, a state-owned company that holds a majority share in Karot
Hydropower Project, the special purpose vehicle that is developing the
project. Another constituent is the Pakistan Private Power and
The project is being built under a
build-own-operate-transfer basis and should be operational by 2020/21:
“And it shall be transferred to Pakistan without compensation after a
30-year operation period,” says Jin Qi, chair of the Silk Road Fund.
project reflects the principles and ideas of the investments of the
Silk Road Fund,” says Jin, who says the fund’s support came in the form
of both equity in China Three Gorges South Asia Investment and a loan to
the project. She says it is “expected to achieve a reasonable
investment yield under controllable risks”.
Jin explains the
clear rationale for the project – the shortfall of electricity in
Pakistan, presenting an opportunity not only to alleviate that shortage
but also boost economic growth and demonstrate a strong environment for
She also puts it into the context of the China-Pakistan Economic Corridor and praises the partners in the project.
this project, Silk Road Fund maintained great cooperation with both
international and Chinese financial institutions on the equity and
loan,” she says. “It has accumulated a wealth of experience in pooling
domestic and foreign capital to support infrastructure construction
among developing countries.”í
It is interesting to see the IFC
involved, tempted presumably by the project’s renewable nature and the
fact that it should help address severe power shortages in Pakistan. IFC
put in $100 million to the $1.65 billion project, which has reached
financial close. IFC also owns 15% of China Three Gorges South Asia
Investment. This is IFC’s first partnership with China Eximbank, CDB or
the Silk Road Fund.
But it is notable that the IFC’s public
announcement on its involvement in Karot does not mention Belt and Road
once. Instead, it refers to the project as: “A major contribution to the
joint World Bank Group Transformational Energy Initiative and Joint
Implementation Plan in Pakistan, which aims to mobilize $10 billion in
new generation investments to address Pakistan’s acute power shortages
and improve sector sustainability.”
From the IFC’s point of
view, what matters is that the project gets built, not what policy
initiative it is tagged as representing.