Document of The World Bank Public Disclosure Authorized Report No. 14587-PM STAFF APPRAISAL REPORT Public Disclosure Authorized PAKISTAN GHAZI-BAROTHA HYDROPOWERPROJECT Public Disclosure Authorized NOVEMBER27, 1995 Public Disclosure Authorized Energy and Project Finance Division Country Department I South Asia Region CURRENCY EOUIVALENTS Currency Unit = Pakistan Rupee (Rs) USSI = 31 Rs (end-June 1995) Rs 1 = $0.0323 (end-June 1995) USSI = 34 Rs (Novemnber15, 1995) RsI = $0.0291 RsI = 100 paisas Fiscal Year July 1- June 30 WEIGHTS AND MEASURES 1 kilovolt (kV) = 1,000 volts (V) I megavolt amperes (MVA) = 1,000 kilovolt-amperes (kVA) 1 megawatt (MW) = 1,000 kilowatts (kW) 1 gigawatt hour (GWh) = 1 million kilowatt hours (kWh) 1 barrel (bbl) 0.1342 metric ton 1 metric ton of oil (MTO) = 7.4 bbls. 1 cumecs = 1 cubic meter per second 1 BOPD = 1 barrel of oil per day MCF = 1 thousand cu. fl MMCFD = 1 million cu. fl per day BCFD = 1 billion cu. fl per day TCF = 1 trillion cu. ft. BTU I1 British Thenmal Unit 0.2520Kilo Calories (KCal) TOE l ton of oil equivalent = I thousand kilograms of oil equivalent KGOE = 1 kilogram of oil equivalent ACRONYMS AND ABBREVIATIONS ADB - Asian Development Bank BOM - Build-Own-Maintain BOO - Build-Own-Operate BOT - Build-Own-Transfer CIDA - Canadian International Development Agency DSM - Demand Side Management EIB European Investment Bank EMU - Environmental Management Unit ENERCON - National Energy Conservation Center ERP - Environment and Resettlement Review Panel ESMAP - Energy Strategy Management Assistance Program EUAD - Environment and Urban Affairs Division GBDO - Ghazi-Barotha Development Organization GBHP - Ghazi-Barotha Hydropower Project GBPMU - Ghazi-Barotha Project Management Unit GTZ - German Agency for Technical Cooperation ICB - Intemational Competitive Bidding ICG - Intemal Cash Generation IDB - IslamnicDevelopment Bank IPP - Independent Power Producers IRDP - Integrated Rural Development Plan IUCN - Intemational Union for Conservation of Nature and Natural Resources KESC - Karachi Electric Supply Corporation KfW - Kreditanstalt fuer Wiederaufbau MPNR - Ministry of Petroleum and Natural Resources MWP - Ministry of Water and Power NEPRA - National Electric Power Regulatory Authority NGO - Non-GovernmentalOrganization NWFP - North-West Frontier Province ODA - UK Overseas DevelopmentAdministration OECF - Overseas Economic Cooperation Fund of Japan OGDC - Oil and Gas DevelopmentCorporation PIC - Project Information Center POE - Panel of Experts PRO - Project Resettlement Organization RAP - Resettlement Action Plan SCARP - Salinity Control and Reclamation Project SNGPL - Sui Northem Gas Pipeline Limited SSGC - Sui Southern Gas Corporation USAID - United States Agency for International Development WAPDA - Water and Power DevelopmentAuthority WEC - WAPDA Environment Cell WPPO - WAPDA Private Power Organization PAKISTAN GHAZI-BAROTHA HYDROPOWER PROJECT Loan and Project Summary Borrower: Governmentof Pakistan(GOP) ImplementingAgency: Water and Power DevelopmentAuthority (WAPDA) Beneficiary: WAPDA Poverty: Not applicable Amount: US$350.0million Terms: Payablein 20 years, includingfive yearsgrace, at the standardinterest rate for LIBOR -basedUS Dollarsingle currency loans. CommitmentFee: 0.75% on undisbursedloan balance,beginning 60 days after signing,less any waiver OnlendingTerms: The total loan would be onlent to WAPDA on the following terms: (a) during constructionperiod of the project, a variable rate equal to the sum of the prevailing World Bank Lending Rate plus a spread of 150 basis points; (b) after completionof construction,a variablerate equal to the sum of the prevailingWorld Bank LendingRate plus a spread of 350 basis points. The repayment period would be up to 23 years includingup to 8 years of grace period. WAPDAwill bear the foreignexchange risk. Proiect Description: The proposedproject woulidcomprise the constructionof the Ghazi-BarothaHydropower Plant (GBHP), the consolidationof the power sector reform program, technical assistance and training components. The GBHP aims at utilizing 76 meters of head available in the Indus River between the tailrace of Tarbela power station and its confluencewith Haro River,and includes:(a) a barrage and ancillaryworks near Ghazi village; (b) a 52-km long concrete-linedpower channeland its ancillary works with a capacity of 1,600 cumecs; (c) a power complexand ancillary works located near the villageof Barothawith an installedcapacity of 1,450 MW to generateabout 6,600 GWh of electricity annually; (d) transmission facilities for power evacuation; and (e) implementationof the EnvironmentalManagement and ResettlementPlans. The power sector reform componentincludes in particular: (a) setting up of GBHP as a separate project entity within the frameworkof the corporatizationprogram of WAPDA; (b) establishmentof a separatetransmission and dispatch corporateentity; and (c) reviewof the Government'spolicy and packageof incentivesfor private power investments. The technicalassistance and training componentsare mainly designedto assist WAPDA in carryingout the EnvironmentalManagement and ResettlementPlans. Benefits: The Ghazi-BarothaHydropower Project is part of the least-costexpansion plan for the generation system in the country. It would promote the efficient development of hydropowerresources thereby reducingthe dependenceon importedpetroleum products and the chronic shortfall in electricity supply. The Economic Rate of Return on the power investmentprogram which includesthe proposed project, is estimated at about 27%. -ii- Risks: Risks which could affect the proposed project could relate to macroeconomic performance of the country, uncertainty in the level of of private power supply and project implementation. The broader macroeconomic risk of deterioration of the short- term financial situation is mitigated by GOP's commitment to a sound fiscal and monetary program supported by appropriate structural reform measures. The risk of inconsistency between the macroeconomic framework and the increased level of Public Sector Development Program resulting from the implementation of GBHP has been mitigated by the provision of an annual review of WAPDA's investment program over a five-year rolling period and the agreement that, during the implementation of GBHP, GOP's Core Public Sector Development Program and its Social Action Program, would not be adversely affected by the financing requirements of GBHP. The risk related to the uncertainties in the level of private power supply has been mitigated by the agreement on setting up policies and appropriate solicitation mechanism that would ensure timely implementation of required additional capacity. The specific project implementation risks have been also mitigated so that the probabilities of delay in project implementation and cost overruns are considerably reduced. The non-mobilization of financmi risk has been mitigated by the high priority given by GOP to the development of the project, thie level and advanced status of commitments of different cofinanciers, and by the legal agreements requiring WAPDA to generate local funds through improvement in efficiency and satisfactory tariffs needed to enable it to comply with the financial covenants. WAPDA's consistent record over the last seven years in meeting an ambitious cash generation covenant provides additional comfort to the Project. Other major risks could be caused by unsatisfactory resettlement, relocation and compensation of persons affected by the project and delay in implementing steps identified to mitigate negative environmental impacts. These risks are being largely mitigated by the comprehensiveness of the Environment and Resettlement Management Plan and the monitoring arrangements through: (a) setting a Project Information Center at project site; (b) assistance of a Ghazi-Barotha Development Organization and of an independent consultant for monitoring resettlement and relocation of project affected people and implementation of environmental mitigation steps; (c) WAPDA's commitment to implement an Integrated Regional Development Plan to support locally-based economic activities in the area; and (d) continued support from the Independent Environment and Resettlement Review Panel. To reduce risks of engineering nature, WAPDA will be assisted by its consultant, and a panel of experts will monitor the activities periodically. Further, geological and hydrological uncertainties are reduced to a minimum because of the extensive investigations at the sites of the barrage, power chaniel and power house, and the comprehensive knowledge gained in the construction and operation of Tarbela Dam. Possible construction delays would be minimized by the advanced stage of the procurement of major works, effective project management through WAPDA's internal organization for the project and the assistance of its consultants. To reduce delays which could be caused by claims of the contractors, a Dispute Review Board is being appointed to settle all claims as expeditiously as possible. -111- EstimatedCosts: Local Foreign Total ------------US$ million--------- A. Land Acquisition 36.95 0.00 36.95 B. Relocationand Resettlement 51.62 0.23 51.85 C. PreparatoryWorks 17.95 11.97 29.92 D. CivilWorks: C-01 Barrage & AncillaryWorks 51.00 119.00 170.00 C-02 Power Channel& Anc. Works 87.00 203.00 290.00 C-03 PowerComplex &Anc. Works 113.97 265.94 379.91 E. Mechanical& ElectricalWorks 87.59 358.20 445.79 F. ConsultancyServices, Engineering, Administrationand Training 58.80