AIIB approves $112.3 million loan for rural electrification project

Kathmandu, December 22

The Asian Infrastructure Investment Bank (AIIB)’s board of directors has approved a $112.3 million loan to Nepal to increase access and improve the quality and efficiency of electricity supply across Province 5 and Karnali Province.

Issuing a statement on Friday, AIIB has mentioned that the loan will help the population in the aforementioned provinces to access grid electricity. AIIB has indicated that there is a large regional disparity on electricity access in rural areas. “The rural and hilly areas of western Nepal are the least connected, requiring substantial investments in distribution networks.”

The ‘Distribution System Upgrade and Expansion Project’ is AIIB’s first sovereign-backed financing project in Nepal. This is also the first project approved, of which AIIB’s technical assistance under the special fund has supported compressive project preparation from the very early stage.

In 2018, Nepal received a $1 million grant under AIIB’s special fund to assist the government to prepare the electrification programme in western Nepal, in terms of feasibility study, technical design, and environmental and social management.\

The project covers 13 districts in Province 5 and Karnali Province and will include the construction of 21 primary substations and over 2,000 kilometres of distribution lines. A key component focuses on strengthening the capacity of Nepal Electricity Authority to plan, analyse and modernise the network performance of the project.

“AIIB’s investment gives much-needed financing to provide affordable, reliable and modern energy, especially in rural areas where people lack basic infrastructure,” said AIIB Vice President and Chief Investment Officer DJ Pandian.

“This project will help provide more than half a million people with new or improved access to electricity. By investing in Nepal’s energy sector, we hope to encourage further infrastructure investment in the country, which will support Nepal’s efforts to achieve the Sustainable Development Goals and drive economic growth, employment opportunities and poverty alleviation,” he mentioned.