ADB extends $160 M in loans for Sri Lanka's power program

The Asian Development Bank's Board of Directors approved loans of US$135 million from its Ordinary Capital Resources (OCR) and a further $25 million from its concessional Asian Development Fund (ADF) for the Clean Energy and Access Improvement Project, Sri Lanka.

The Clean Energy and Access Improvement Project is the country's push to expand and improve its electricity services program, especially to the poor and those living in conflict-affected areas.

The funds will be used to support energy efficiency improvements, to develop the use of renewable energy, and to increase connections and services to rural households.

The Government has now launched a 10-year development plan to address these constraints and the project will support the CEB and the Lanka Electricity Company to improve coverage and service efficiency.

The initiatives will include modernizing and upgrading the country's transmission system and launching a demand-side management program for public lighting.

Support for renewable energy will add 200MW of hydro-generated electricity to the national grid and encourage private sector investment in the industry. At least 60,000 poor households will be connected to electricity services through micro-credit support.

"The access for the poor component will directly benefit the Eastern Province which has been severely affected by the conflict (between the Government and the Liberation Tigers of Tamil Eelam) as well as other poor regions," ADB's South Asia Department Principal Energy Specialist Tomoyuki Kimura said.

The loans cover 85 percent of the project cost of $188.2 million. The demand-side management initiative will receive $2.2 million from ADB's Climate Change Fund.

The OCR loan has a 25-year term, including a period of five years, with the interest rate set in accordance with ADB's London interbank offered rate. The ADF loan of 32-years will carry an interest charge of 1.0 percent per annum during the 8-year period, and 1.5 percent for the balance.

The Government of Sri Lanka will also provide the equivalent of $24 million. Technical assistance grants of $3.8 million will be given to support the project implementation and to strengthen capacity of the Public Utilities Commission of Sri Lanka (PUCSL).

ADB will provide $1 million from its regular TA funding program, with $800,000 from the Climate Change Fund and $2 million from the Japan Special Fund, administered by ADB.

The Ministry of Power and Energy will be the executing agency for the project, which is due for completion in May 2013.