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MANILA, Philippines, December 13, 2006 (Refocus Weekly) A financing facility of US$510 million has been approved to develop renewable energy resources in Pakistan.
ADB (Asian Development Bank) will establish the ‘Renewable Energy Development Sector Investment Program’ to expand power supply in rural areas through 600,000 new connections to 4.8 million people. The multitranche financing facility is one of the first to be developed under ADB's evolving clean energy initiative, through which ADB plans to expand operations in developing countries to $1 billion per year.
“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 of ADB. “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.”
Energy is a major constraint to economic growth in Pakistan, and the country is highly dependent on imported oil and national demand for electricity is outstripping supply. The trend will continue, with production capacity to reach 162,590 MW by 2030 compared with the current 15,500 MW, of which renewables account for only 180 MW.
The first program under the ten-year facility will finance a set of small hydropower plants and each loan will partially finance renewable energy development projects. The governments of Northwest Frontier Province and Punjab expect to lend $180 and $150 million, respectively, while other provinces can request $170 million of funding for renewable energy projects.
The bulk of the facility comes from ADB's capital resources and will accrue interest, while $10 million will come from ADB's concessional Asian Development Fund to support investments in developing institutions, with an annual interest rate of 1% during the first eight years and 1.5% per annum to a term of 32 years. The Alternative Energy Development Board is the executing agency for the program at the federal level, while provincial governments will execute the program via special purpose agencies.
ADB was established in 1966 to reduce poverty in the Asia and Pacific region, and is owned by 66 members and approves loans and grants of $6,950 million a year, with another $200 million in technical assistance. For every dollar lent by ADB, an additional $1.27 cents was mobilized from other official sources, export credit agencies, and commercial institutions.
The bank has 26 field offices around the world, with 2,000 staff from 50 countries. Japan and the United States are the largest shareholders, with 15.7% each of total subscribed capital.
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