ISLAMABAD, Oct 3: The Asian Development Bank (ADB) will provide $510 million to Pakistan to fund its $2.2 billion renewable energy development sector investment programme, envisaging development of low-head hydropower projects in Punjab and NWFP provinces.

A formal agreement to this effect will be signed here on Friday by the representatives of ADB and the government.

The total investment requirement for renewable energy development to reach 3.5 per cent target by 2015 is estimated as $2.2 billion. The ADB loan facility will cover up to $510 million. The rest will have to be found from various sources such as private sector, multi-lateral and bi-lateral agencies, or through public-private partnership.

The programme is part of an initiative to help meet power shortages and diversify electricity sources. Under the first set of sub-projects, the NWFP will develop a cluster of small hydropower from perennial high-head rivers that are abundant in the province.

Punjab province will also develop a cluster of low-head, high-volume small hydropower stations that can be installed in the existing irrigation canal system with perennial water flows.

Pakistan is a water rich country, offering a total hydropower potential of more than 45,000MW. Hydropower resources are located mainly in the northern and central parts of the country. The total installed capacity of the hydropower stations in the country is 6,595MW.

The ADB financing will be used to develop feasibility studies of new sites for future renewable energy investments by the public sector, bi-lateral and multi-lateral financial institutions, and the private sector and for promoting enhanced social and environmental safeguards.

It is estimated that about $900 million investment will be made by the private sector, $400 million by other lending agencies and about $390 million by the federal government. A number of incentives and concession would be made available for development of projects under the public-private partnership scheme.

Under the agreement, the ADB will have the discretion to deny any financing request made by Pakistan, cancel the uncommitted portion of the facility, and withdraw Pakistan’s right to request any financing tranche under the facility.

The ADB financing will be in two parts. The $500 million assistance will be under the Ordinary Capital Resources and $10 million from ADB’s Special Funds Resources for Capacity Development of related agreements. The ADB programme would be completed by December 2017.