ADB to Help India's Himachal Pradesh Become 'Hydropower State' Via Multi-Tranche Loan

News Release | 23 October 2008

MANILA, PHILIPPINES -The Asian Development Bank (ADB) is helping Himachal Pradesh become India's "hydropower state" through an $800 million multi-tranche financing facility.

The eight-year loan package will help finance the construction of several run-of-river hydropower generating plants that will bring in combined capacity of 808 megawatts (MW) for the small mountainous state.

Himachal Pradesh has abundant water resources, with five major rivers flowing from the western Himalayas. Its power generation potential is 20,415 MW - about 25% of India's total hydropower potential - out of which only 6,150 MW has been developed.

Recognizing the state's comparative advantage, the state government in 2006 approved a Hydro Power Policy that aims to make Himachal Pradesh the "hydropower state" of India.

"Himachal Pradesh's focus on hydropower development will provide jobs to state residents and will further the state's and the country's goal of maximizing this clean, indigenous resource to help meet its energy needs," said Andrew Jeffries, an Energy Economist at ADB's South Asia Department.

The multi-tranche financing facility allows ADB to engage the state government in a continuous long-term dialogue on its clean energy policies. It provides multiple loans to support a range of projects under the state's clean energy development program. The loans will be allocated based on the readiness of the project.

The projects will provide affordable and reliable power supply to local residents and industrial users in the state. Any excess supply can be exported to other parts of India.

At present, ADB and Himachal Pradesh government have identified two projects ready for financing through the first loan tranche of $150 million - the construction of the 111-MW Sawra Kuddu Hydroelectric Project on the Pabber river in Shimla district, and civil works for the 65-MW Kashang I Hydroelectric Project located in Kinnaur district. The loan has a 25-year repayment period.

The overall estimated cost of all projects is about $1.5 billion. The state government will finance $450 million for the projects, and the remaining $250 million will be financed by other financial institutions.

Aside from infrastructure projects, the loan also has a training component to help state-owned Himachal Pradesh Power Corp. prepare future projects, implement approved projects, and monitor program and project implementation. Training will also broaden their functional expertise as the state's power generating company.

The multi-tranche financing facility will be sourced from ADB's ordinary capital resources, with final terms and conditions to be established under individual loan agreements based on prevailing ADB policies.