US$ 810 million for Pakistan's power sector

By Richard High08 September 2008

The Asian Development Bank (ADB) has approved a US$ 810 million, multi-tranche financing facility for Pakistan's power sector, which is struggling to cope with growing demand.

The funds, to be released in several tranches over 10 years, will support Pakistan's Power Distribution Enhancement Investment Program (PDEIP) for 2008-2017, which is currently estimated at US$ 5.2 billion, according to the ADB.

Pakistan's national power grid is currently short of generating capacity and is suffering from insufficiently maintained transmission and distribution systems, which results in supply interruptions. System losses from distribution companies range from 10% to 33%, above international best practice.

The ADB funds will support the Government's ongoing power sector reform program, which is designed to provide a safe, reliable supply of power and meet an estimated annual +8% rise in GDP growth from 2005-2015. Power coverage to rural areas will also be expanded under the scheme.

ADB's investment program will focus on the distribution sector, which is burdened with worn out and overloaded infrastructure, power losses, capacity shortfalls, and other constraints. It aims to help the distribution companies provide an additional 12000 GWh (gigawatt-hours) of electricity towards meeting expected peak demand and to give an additional 30 million people access to power from the national grid.

The program will ensure timely subsidy payment by the Government to the distribution companies. It also aims to improve financial management and corporate governance standards in distribution companies that should help attract more private firms to invest in the sector.

Commenting on the funding, Rune Stroem, a principal energy specialist of ADB's Central and West Asia Regional Department, said, "A secure and predictable electricity supply will lead to social and economic benefits and improve conditions for schools, hospitals and other social services."

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