Karot Hydropower Project to be run by China for 30 years before handover
China's $40 billion Silk Road Fund for investment, part of the nation's commitment to the Belt and Road initiative, announced its first project on Monday during President Xi Jinping's visit to Islamabad.[Special coverage]
Silk Road Fund Co, the management arm of the fund, has signed a memorandum of understanding with China Three Gorges Corp and the Pakistan Private Power and Infrastructure Board to provide capital to build the Karot Hydropower Project on the Jhelum River in northeast Pakistan.
It is the fund's first investment project since being established in Beijing in December.
According to the agreement, the fund will provide capital and serve as a major shareholder in China Three Gorges South Asia Investment Ltd, a subsidiary of China Three Gorges Corp, to support clean-energy development projects in Pakistan.
The fund also will provide loans to the project by joining in a consortium led by the Export-Import Bank of China.
Karot Hydropower Station is a priority project within the broader China-Pakistan Economic Corridor initiative, proposed by Premier Li Keqiang in May 2013. The initiative aims to build a $46 billion, 3,000-km-long route from China's Xinjiang Uygur autonomous region through the Karakoram mountain range and Pakistan's Balochistan, to the Gwadar Port, connecting China, Pakistan and the Arab world.
The project is in the fourth stage of the river's five-stage development plan, with an installed capacity of 720,000 kilowatts, and an annual power generation capacity of 3.2 billion kilowatt-hours. It requires a total investment of about $1.65 billion.
Chinese companies plan to develop a total capacity of 3,350 megawatts along the Jhelum River through new developments, mergers and acquisitions, according to a statement from the fund.
Construction on the project "is to start by the end of this year" and commence operations in 2020, the statement said. "The station will be operated by the Chinese side for 30 years and then transferred to the government of Pakistan."
As a market-oriented investment fund targeting medium-and long-term projects, the Silk Road Fund will focus on key projects along the Silk Road Economic Belt and the 21st Century Maritime Silk Road while continuing to find potential targets, the company said.
In November, Xi announced during the Beijing Asia-Pacific Economic Cooperation meetings that China would contribute $40 billion to set up the Silk Road Fund. He emphasized that the fund will be used to provide investment and financing support for infrastructure, resources, industrial cooperation, financial cooperation and other projects in countries involved in the Belt and Road initiative.
Zhou Xiaochuan, the Chinese central bank governor, has described the fund as a "private equity" investor with a longer investment return.
Jin Qi, chairwoman of the fund management company, said the projects will also support the development of Chinese high-tech and equipment manufacturing industries by helping enterprises go overseas.
