ADB supports Dagachhu project (Economy)

Published on Oct 30 2008 // Main News

New Delhi, Octobre 31: The Asian Development Bank (ADB) has extended support to power project in Bhutan that will produce clean energy for export to India and increase electricity coverage in rural areas where the bulk of the poor live.

The Green Power Development Project—which includes Bhutan's first public-private partnership (PPP) for an infrastructure project—will help tap the country's under-utilized hydropower resources, increase government revenues for development spending and improve the standard of living for nearly 9,000 rural power consumers, a statement by ADB said.

The statement furhter reads, it will also help promote clean energy development, foster cross-border cooperation and provide a potential model for future private investments in the sector.

With the funding, government will construct a pland at Dagachhu that produces 114 MW of power, mostly for export to India.

It will also support a rural electrification programme that will provide electricity to domestic households and businesses in remote regions of the country using renewable energy sources of hydropower and solar power.

"Expanding generating capacity for the export of clean power and increasing rural access to electricity will enhance energy and social security. It will provide the government a long-term revenue stream to finance its development needs and to cut poverty. It will help stimulate regional trade in clean energy and reduce pollution," ADB's South Asia Department Energy Specialist Kaoru Ogino isn being quoted in the statement.

The Dagachhu power plant will cost US$ 201.5 million to be split 60:40 between debt and equity. ADB will provide a 30-year, US$ 51 million loan from its ordinary capital resources and a 32-year, US$ 29 million loan from the Asian Development Fund (ADF).

Additional financing of US $55.5 million is expected from the Austrian government export credit agency OeKB along with US $45 million from the government and its company and fund, and US $21 million from India's Tata Power Company.

The Austrian Government, which is one of the major proponents of the project, will support engineering implementation of Dagachhu hydropower development.

The state-owned Druk Green Power Corp., Bhutan and Tata Power Company, India have set up a joint venture company for the Dagachhu project which will serve as a showcase for public-private partnerships (PPPs), leading to increased foreign direct investments in energy development and a reduced state debt burden.

The rural electrification initiative will receive an ADB grant of US$ 25.2 million, US$ 6.7 million from the government and US$ 1 million from the Asian Clean Energy Fund, subject to Japanese government's approval.

The project is also expected to install over 100 solar power systems generating energy for off-grid rural users including schools, health clinics and other community facilities in isolated remote areas. Bhutan News Service