ADB to provide loans for India's HEP programme

By Richard High24 October 2008

The Asian Development Bank (ADB) is to loan India's Himachal Pradesh state US$ 800 million through a multi-tranche financing facility for development of its hydropower programme.

The eight-year loan package will help finance the construction of several run-of-river hydropower plants that will bring in combined capacity of 808 MW for the small mountainous state.

Himachal Pradesh has abundant water resources, with five major rivers flowing from the western Himalayas. Its power generation potential is 20,415 MW - about 25% of India's total hydropower potential - out of which only 6,150 MW has been developed.

Recognizing the power generating potential, in 2006 the state government approved a Hydro Power Policy that aims to make Himachal Pradesh the "hydropower state" of India.

At present, the ADB and Himachal Pradesh government have identified two projects ready for financing through the first loan tranche of US$ 150 million - the construction of the 111 MW Sawra Kuddu Hydroelectric Project (HEP) on the Pabber river in Shimla district, and civil works for the 65 MW Kashang I HEP located in Kinnaur district.

The loan has a 25-year repayment period.

The overall estimated cost of all projects is about US$ 1.5 billion. The state government will finance US$ 450 million for the projects, and the remaining US$ 250 million will be financed by other financial institutions.

Commenting on the loans, Andrew Jeffries, an energy economist at the ADB's South Asia Department, said, "Himachal Pradesh's focus on hydropower development will provide jobs to state residents and will further the state's and the country's goal of maximizing this clean, indigenous resource to help meet its energy needs."

In a statement on its website the ADB said, the multi-tranche financing facility will allows it to "engage the state government in a continuous long-term dialogue on its clean energy policies. It provides multiple loans to support a range of projects under the state's clean energy development program. The loans will be allocated based on the readiness of the project."

The projects are designed to provide "a affordable and reliable power supply" to local residents and industrial users in the state. Any excess supply can be exported to other parts of India.

Aside from infrastructure projects, the loan also has a training component to help state-owned Himachal Pradesh Power Corp. prepare future projects, implement approved projects, and monitor program and project implementation, said the ADB statement.

Training will also broaden their functional expertise as the state's power generating company.

The multi-tranche financing facility will be sourced from ADB's ordinary capital resources, with final terms and conditions to be established under individual loan agreements based on prevailing ADB policies.

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