KATHMANDU: Years of underinvestment in electricity infrastructure has left Nepal with one of the most unreliable power supply systems in South Asia, putting a brake on the country’s economic growth.

In response, the Asian Development Bank (ADB) board of directors has approved a loan of $65 million to strengthen and expand electricity transmission and distribution facilities in a bid to cut network losses and reduce supply interruptions.

Funds will also be used to upgrade two hydropower plants, introduce compact fluorescent lamps and install solar and

solar-wind powered streetlights in a bid to boost energy efficiency, increase the use of clean renewable technologies and take the strain off the national grid.

Public-private franchising partnerships will be developed in select urban areas to improve service quality, providing a model that could be replicated in future, according to ADB.

The Energy Access and Efficiency Improvement Project will support the government’s long-term vision to provide universal coverage using grid-based and off-grid supplies by 2027. Installed generating capacity at the end of 2008 was 615 MW with just 33 per cent of households connected to the national grid.

“The project will strengthen and increase supply capacity, increase consumer connections, improve the finances of the state-owned Nepal Electricity Authority, and eventually allow for increased cross-border energy trade, giving the economy a boost,” said Priyantha Wijayatunga, Energy Specialist in ADB’s South Asia Department.

An estimated 20,000 additional households are expected to directly benefit from the distribution improvements, while all 1.5 million grid-connected

electricity consumers will receive more reliable power supplies. The installation of 1,000 solar and solar-wind streetlights in municipal areas of Bhaktapur, Kathmandu and Lalitpur will improve safety, particularly for women and children, while the project is expected to reduce an estimated 15,000 to 20,000 tonnes of carbon dioxide emissions annually.

ADB’s loan from its concessional Asian Development Fund covers 69 per cent of the project cost of $93.7 million. The loan has a 32-year term, including a grace period of eight years. Interest is charged at 1 per cent per annum during the grace period and 1.5 per cent per year for the rest of the term.

Grants totaling $4.5 million from the Climate Change Fund and Multi-Donor Clean Energy Fund, administered by ADB, will also be provided. The Government and Nepal Electricity Authority will supply the balance of $24.2 million. Nepal Electricity Authority is the executing agency for the project which is due for completion around September 2014.