ADB extends loan of $200m for power infrastructure in Nepal

Kathmandu, Aug. 27

The Asian Development Bank (ADB) has agreed to provide concessional loan equivalent to US$ 200 million (about Rs. 23.88 billion) to Nepal for the implementation of South Asia Sub-regional Economic Cooperation (SASEC) Power Transmission and Distribution System Strengthening Project.  

Similarly, Norway agreed to provide a grant co-financing equivalent to US$ 35 million (about Rs. 4.18 billion) to be administered by the ADB.

Finance Secretary Sishir Kumar Dhungana and ADB Country Director Mukhtor Khamudkhanov signed the loan and grant agreement on Thursday at the Ministry of Finance, Singha Durbar.

Likewise, project agreement was signed by Managing Director of Nepal Electricity (NEA) Authority Kul Man Ghising and ADB Country Director Khamudkhanov at the MoF.

Dhungana said that ADB was a major development partner supporting Nepal’s energy sector.

“The project connects to SASEC framework by upgrading substations to enable full-fledged operation of the transmission line at 400 kilovolts, and to facilitate cross-border power exchange with India. The project will also support State 2, where the quality of electricity supply is poor and about 20% of households are still out of access to the national grid,” he further said.

Khamudkhanov said that electricity supplies were expected to increase rapidly during the next several years. Given this, electricity network enhancement has been a priority.

This loan is concessional having a 32-year term, including a grace period of 8 years, an interest rate of 1.0 per cent per year during the grace period and 1.5 per cent per year thereafter.

The grant will be utilised for financing expenditures related to power transmission capacity enhancement and improvement of distribution network and capacity of energy-based enterprises development in Provice-2.

The MoF will relend these assistances to NEA through subsidiary loan and grant agreements for implementation of project activities. The project will accomplish the reinforcement and modernisation of the power supply system in Kathmandu in Bagmati State and will begin strengthening of distribution systems outside of the Kathmandu Valley starting with the Bharatpur Metropolitan City area in Bagmati and Pokhara in Gandaki State, suffering from persisting power supply interruptions.

The project will also support State 2, where the quality of electricity supply is poor and about 20% of households are still without access to the national grid. Further, the project will strengthen transmission lines for evacuation of hydropower to the main load centers, while excess power is traded with neighboring countries, said the MoF.

 The project also aligns with SASEC framework by upgrading substations in Khimti, Barhabise, and Lapsiphedi to enable full-fledged operation of the transmission line passing through these substations at 400 kilovolts, and to facilitate cross-border power exchange with India.

Published in The Rising Nepal daily on 28 August 2020.