Asian Development Bank to give 0mln for MP power sector

Singapore, Apr 25 (UNI) The Asian Development Bank (ADB) is extending a 620 million dollar loan to Madhya Pradesh's power sector.

The loan is granted after India requested for ADB to support the 5.3 billion dollar investment programme for the power sector of Madhya Pradesh, said the Manila-based ADB in a statement yesterday.

''A secure and predictable electricity supply will enable social and economic benefits to materialiSe, and will ensure improved conditions for schools, hospitals, and other social services,'' said ADB Senior Finance Specialist Neside Tas-Anvaripour.

At the state level, the targeted energy efficiency investments will bring the cost of supply in line with average tariffs by 2012 and will lead to sector profitability and eventually financial sustainability, he said.

The investment programme will run from 2007 to 2012 and involves funding from the Madhya Pradesh Government as well as the private sector.

The Reserve Bank of India has forecast Madhya Pradesh to experience strong growth in electricity demand between 2007 and 2012 fueled by significant economic expansion. The state will need to install an additional capacity of more than 6,000 megawatts during that six-year period to ensure stable and affordable power supply to all households six years from now.

The ADB funding will be disbursed in five tranches to finance projects involving energy efficiency improvements in transmission, distribution and nonphysical investments facilitating strategic public private partnership in distribution as well as the establishment of the energy conservation fund and other energy efficiency initiatives.

ADB said the investments will have important environmental benefits by substantially reducing losses and boosting energy efficiency.

The investment programme will offset emissions and reduce the pollution intensity of the generation plants connected to the state grid by improving transmission and distribution efficiency, it said.

The proposed ADB investments will almost reduce transmission and distribution losses from about 41 per cent to about 23 per cent.

Additional efficiency gains and environmental offsets will come from investments via the new Energy Conservation Fund, it said.

ADB will source the funding for the facility from its ordinary capital resources. The first two tranches of the facility will have a principal repayment period of 20 years, excluding a five-year grace period. Terms of future tranches to be sourced from the facility may vary.

In 2001, ADB approved a 350 million dollar loan to support the Madhya Pradesh Power Sector Development programme to facilitate the restructuring of the power sector and boost efficiency through technical investments.

UNI