ADB loan to power and rural water

ADB loan to Nepal to tackle chronic power shortages and rural water supply

July 7, 2014, 5:45 p.m. Published in Magazine Issue: Vol: 08 No. -2 June. 20- 2014 (Ashar 6, 2071)

The Asian Development Bank (ADB) has approved a $180 million equivalent loan to help Nepal overcome its crippling power shortages and export surplus power to neighboring India.

“Right now, limited generating capacity and weak power transmission and distribution networks mean two thirds of households in Nepal have no electricity and many of those who are suffer power cuts for up to 12 hours a day during the dry season,” said Lei Zhang, Energy Specialist with ADB’s South Asia Department. “There’s a pressing need to provide more energy to domestic customers and harness more clean energy for sale overseas when the country has surpluses.”

The loan will help Nepal Electricity Authority (NEA) finance a substantial upgrade and expansion of transmission and distribution lines and substations, allowing the transfer of up to 2,000 megawatts (MW) of power to main load centers in the Kathmandu Valley. As well as meeting domestic needs, this network expansion will give Nepal the ability to export at least 1,200 MW of electricity to India, once a second 400 kilovolt cross-border transmission line from Bardaghat to Gorakhpur in India is complete. With six new hydropower plants due to come on stream over the next 3 to 6 years, the country expects to have a substantial wet season supply surplus for export by 2018.


The project will also help Alternative Energy Promotion Centre (AEPC) provide electricity to the hard-to-reach rural communities, with mini-grid renewable energy systems, including mini hydroelectric, solar and wind generation, through provision of an ADB credit line and the ADB-administered Strategic Climate Fund. Through an associated capacity development technical assistance, the project will support AEPC to develop a feasibility study for a large-scale wind farm.

Since 2009, ADB has helped Nepal reform and overhaul its power sector and the new assistance will aid the government’s target of providing grid power to 75% of the population, with off-grid energy for the remaining 25%, by 2027. The project is also a priority initiative of the broader South Asia Subregional Economic Cooperation Program, which aims to expand power and other cross-border exchanges and connections around the region.

The loan, from ADB’s concessional resources, will be complemented by a cofinancing loan of $120 million from the European Investment Bank, a $60 million grant from the Government of Norway, and an $11.2 million grant from the ADB-administered Strategic Climate Fund. The projects are expected to be completed by the end of 2021.

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