The International Development Association (IDA), the World Bank Group’s grant and low-interest arm, has approved a financing package for development of the Dasu Hydropower Stage-I Project (DHP-I) in Pakistan.

The run-of-river DHP-I project is located on the Indus River in Kohistan district. It will include a 2160MW hydro plant, which can be expanded to 4320MW in the future with low additional cost. The project is seen as an important element of the government’s strategy to restore Pakistan’s energy sector to a role that will effectively support long-term economic growth, and is expected to kick start the development of the Indus Cascade.

“Dasu Hydropower Project is important for helping the people of Pakistan to reduce their carbon footprint and make electric power generation more sustainable,", said Rachid Benmessaoud, World Bank Country Director for Pakistan. "The program is an important part of the transformational energy initiative of Pakistan, in which the support from across the World Bank Group is focused on helping Pakistan’s energy sector out of its crisis and onto a more sustainable path that supports economic growth."

DHP-I cost is estimated at about $4.2 billion. The financing package approved this week consists of an IDA Credit of $588.4 million and an IDA Partial Credit Guarantee (PCG) of $460 million to help mobilize commercial financing for the project.

This is the first attempt by the World Bank Group to finance a large infrastructure project on a sequential basis through a combination of credits and guarantees to mobilize the full financing over the construction period.