Work on the Neelum Jhelum hydropower project has slowed down as lenders have refused to give loan for the project. The hydropower plant is being set up in Azad Jammu Kashmir with some financing done through loan from the Islamic Development Bank, Kuwait Fund for Development, Saudi Fund for Development, and OPEC Development Fund.
The financiers have stopped the release of the remaining loan amount due to the rising cost for completion of the project. The initial cost for the project was $1.8 billion which increased to $2.74 billion under the previous government. During the current government’s term, the cost has further increased to $4.21 billion. The financiers had agreed to loan $692 million, out of which $259.5 million has already been loaned. The remaining $433 million which was due in June has not been loaned.
The financiers are demanding performance security with regard to the increased cost. Clause 10 of the agreement between the government and the lenders calls for 10% performance security being provided while clause 60.02 calls for no payment to be paid until the performance security is paid. During a meeting between the financiers and the project management, the financiers requested additional performance security in addition to the clause 10 performance security. The project management had a different view saying that the performance security should be paid according to the cost which was agreed on. The disagreement has led to the halt of the loan payment.
The Neelum Jhelum hydropower project is expected to generate 969 megawatts of electricity. 72% of the work has been completed on the project. The project was expected to be completed by November 30 2016. Now the project is expected to be complete in 2017 and then provide electricity to the national grid.