The International Finance Corporation (IFC) has lent US$100mn to a hydropower project in Pakistan.

The 720MW Karot hydropower plant is one of the largest renewable projects in Pakistan and will help address power shortages that plague the country.

The project sponsor is China Three Gorges Corporation (CTGC), which is completing extensive power work in Pakistan as part of the China Pakistan Economic Corridor (CEPC) – a vast series of infrastructure projects aimed at connecting China’s western provinces to the sea via Pakistan’s Gwadar Port.

In 2015, the IFC acquired a 15% equity stake in CTGC’s investment vehicle, China Three Gorges South Asia Investment Limited. The aim was to collaborate on renewable projects in Pakistan together, and this loan marks the first time that has happened.

The total project cost is US$1.7bn, with the bulk of the finance already agreed with China’s state-owned lenders, including the China Export Import Bank, China Development Bank and the Silk Road Fund. This transaction marks the IFC’s first collaboration with each of these financial institutions.

The IFC’s involvement is part of the World Bank’s plans to mobilise US$10bn in power generation investments in Pakistan, as a way of boosting trade through providing businesses with steady power supplies.

“Improving access to electricity in Pakistan is a priority for the IFC and the World Bank Group, and we are pleased to see the Karot project advance,” says Bernard Sheahan, the IFC’s global director for infrastructure and natural resources.

He adds: “Our priority has been to support the sponsor and the company in the project’s development by strengthening their environmental, social, and corporate governance capabilities, to ensure power is delivered sustainably.”

The Karot plant will be operated by Karot Power Company (KPCL), which is a special purpose vehicle majority owned by CTGC and the IFC’s aforementioned investment company. It will be located around 55km southeast of Islamabad, span 460m across the Jhelum River, and stand 95m high.

The power is to be sold to the National Transmission and Despatch Company under a 30-year public-private partnerships, and is expected to provide electricity to seven million homes.