MANILA, PHILIPPINES, Dec 07, 2006 -- M2 PRESSWIRE

 

ADB is promoting the development of renewable energy in Pakistan through a multitranche financing facility of up to US$510 million.

The program is the first of its kind in Pakistan and also one of the first to be developed under ADB's evolving clean energy and efficiency initiative, through which ADB is planning to expand energy efficiency operations in its developing member countries to $1 billion per year.

Power and energy, together with transport connectivity and water, are major constraints in Pakistan to achieving the kind of high economic growth that can benefit the poor.

Pakistan's energy supplies are highly dependent on oil imports, the cost of which accounts for a large share of the country's total import bill. In addition, national power demand is outstripping supply. This is a trend likely to continue for some time, given that Pakistan's production capacity needs are projected to reach 162,590 megawatts by 2030, from 15,500 MW in 2005.

While thermal power (coal, oil, and gas) is expected to meet much of the future demand, there is also enormous scope for more environment friendly options. Renewable energy accounts for only 180 MW of Pakistan's present power output.

"Small- to medium-sized hydropower plants offer the greatest renewable energy potential for Pakistan, while possibilities also exist in promoting greater use of wind, solar, and biomass power," says Piya Abeygunawardena, ADB's team leader for the project.

"Investment in such renewable energy options would not only be beneficial to the country's energy security, but would boost social equity, lead to a cleaner environment, and make good economic sense."

The program, officially called the Renewable Energy Development Sector Investment Program, will expand the country's power supply, especially in rural areas, sufficient to serve about 600,000 new domestic connections of 4.8 million people. It will also improve reliability and quality of supply.

The first program under the facility will finance a set of small to medium hydropower plants prepared by Northwest Frontier Province and Punjab.

The facility will have a life of 10 years to 2017. Each loan under the facility would be at least $50 million and be used to partially finance renewable energy development projects.

The governments of Northwest Frontier Province and Punjab expect to take out several loans under the facility to totals of $180 million and $150 million, respectively. Other provinces can request funding for renewable energy projects totaling $170 million.

The bulk of the facility comes from ADB's ordinary capital resources and will be subject to interest determined in accordance with ADB's LIBOR-lending facility. Some $10 million of the facility comes from ADB's concessional Asian Development Fund to support investments in developing institutions and capacity, as well as feasibility studies.

Interest for this portion is charged at 1% per annum during the eight-year grace period and 1.5% per annum subsequently, and carries a term of 32 years.

The Alternative Energy Development Board is the executing agency for the program at the federal level, while at the provincial government level, the program will be executed via special purpose implementing agencies such Irrigation and Power Departments.

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