The project would be located on the river Jhelum in the Neelum valley and have the capacity to produce about 1000 mega watt, to be built at a total cost of over Rs 87.710 billion, including an estimated foreign exchange component of $1.2 billion.
The leader of the consortium, Yousuf Mohamed Yousuf Al-Najibi who is a leading businessman and industrialist of the Gulf region, discussed the proposal with the WAPDA authorities and high-ranking officials of the federal government during a recent visit to Pakistan.
In fact, he is already involved in investment activity in this country. His company known as Coastal Trading is reported to be associated with Heavy Industries Taxila (HIT) in the production of seamless steel pipes and armoured vehicles to meet the defence requirements.
The company's range of defence production in HIT is stated to be very wide, pursued with a number of joint venture arrangements with the manufacturers of international repute.
The Coastal Trading owned by Yousuf Mohamed Yousuf Al-Najibi is also reported to be operating in the USA, Europe, Middle East and Far East.
The initiative of the Al-Najibi group would be seen as a highly significant development in the context of foreign investment flows into Pakistan.
An important aspect of the power project is that it would be undertaken without any loan financing from the international financing agencies like the World Bank and the Asian Development Bank.
The entire investment is likely to be raised by the participating groups of entrepreneurs. As a result, the profitability of the project may be attractively high for foreign investors.
Thus it will be a bold venture on the part of the sponsors who will be sharing the entire risk of capital investment among themselves. The proposed investment testifies to the confidence of foreign investors in Pakistan's economic potential.
A favourable impact of this project on other investors looking for opportunities of investment in Pakistan is likely to be further investment flows. In this context, it will be of interest to refer to the report that the Regional Executive of General Electric International (GE) in a recent meeting with Finance Minister Shaukat Aziz, unfolded wide-ranging plans of his company to make fixed capital investment in a number of industrial, infrastructure and energy projects in Pakistan.
The company has so far restricted its operations to largely trading and business establishments. Evidently, profitable avenues of direct investment have prompted this company to participate in investment activity on a broad scale.
Reverting to Al-Najibi's project, the AJK government has been looking forward to the establishment of hydropower generation facilities in the Neelum valley. The offer from the Gulf sponsors would therefore, be enthusiastically welcomed by the AJK government and also the Water and Power Ministry of the Federal government.
After the Ghazi Barotha Hydropower Project, this is going to be the largest hydroelectric project in Pakistan which may be expected to tilt the balance in favour of hydropower generation in the country and thereby reduce the reliance on costlier furnace oil for power generation, to an appreciable extent.
The cumulative cost per unit of power generation, hydroelectric and thermal-based power combined, would then enable the utilities to lower the average cost of power to the consumers at large in the long run. It is well known that the cost of power generation at Ghazi Barotha even at 54 paisa per kwh is far lower than the cost of about Rs 5 to Rs 6 paid by WAPDA to the IPPs to purchase thermal-based (fuel oil) power.
That is precisely why the government's new power policy has discouraged expansion in oil-based power-generation projects and laid emphasis on power generation from indigenous sources like hydro plants and coal-based units.