MANILA, Nov 23: The Asian Development Bank (ADB) will help to bridge a pending electricity shortfall and encourage the development of hydropower resources in Pakistan through a new $ 37.3 million loan.

The loan will help finance an approximately 80 megawatt power plant located downstream of the Mangla Dam on the Jhelum River in Azad Kashmir.

This is ADB’s first proposed assistance to a private sector hydropower project in Pakistan and the first such project to be developed in the region.

The New Bong Escape Project, so called because of its position on the escape channel from the existing Mangla power station, will be a “run-of-the-river” scheme involving no new dam or reservoir and will thus have minimal environmental and social impacts.

The electric power generated by the project will feed into the national grid, according to an ADB news release.

The project company, Laraib Energy Limited, is owned by subsidiary of Ranhill Berhad, a Malaysian engineering and utility asset-owning company listed on the Kuala Lumpur Stock Exchange and by various local and international business interests.

The project is expected to begin construction shortly and is scheduled to begin commercial generation of electricity by the beginning of 2009.

Azad Kashmir is home to some of the areas worst affected by the devastating earthquake that hit parts of Pakistan in October.

“The project, while far enough from the epicenter not to have been directly affected, should bring job opportunities and will help upgrade infrastructure in an area where both are much needed,” says Michael Barrow, an ADB Principal Structured Finance Specialist.

Together with the ADB loan and the sponsor equity, the project is expected to be financed with loan facilities from the Islamic Development Bank and Pakistani commercial banks. The Islamic Development Bank facility will be Sharia-compliant.

“This project represents a number of important firsts for ADB and for the region,” says Mr Barrow.—APP