The programme is the first of its kind in Pakistan and one of the first to be developed under ADB’s evolving clean energy and efficiency initiative, through which ADB is planning to expand energy efficiency operations in its developing member countries to US$1B a year.

Officially called the Renewable Energy Development Sector Investment programme, it will expand the country’s power supply, especially in rural areas, sufficient to serve about 600,000 new domestic connections of 4.8M people. It also aims to improve reliability and quality of supply.

Pakistan’s energy supplies are currently highly dependent on oil imports, with only 180MW of the country’s present power output coming from renewables. National power demand is outstripping supply, with Pakistan’s production capacity needs projected to reach 162,590MW by 2030, from just 15,500MW in 2005.

The first programme under the facility will finance a set of small to medium hydro power plants prepared by Northwest Frontier Province and Punjab.

The facility will have a life of 10 years to 2017. Each loan under the facility would be at least US$50M and be used to partially finance renewable energy development projects. The governments of Northwest Frontier Province and Punjab expect to take out several loans under the facility to totals of US$180M and US$150M, respectively. Other provinces can request funding for renewable energy projects totaling US$170M.

Most of the facility comes from ADB’s ordinary capital resources and will be subject to interest determined in accordance with ADB’s LIBOR-lending facility. Some US$10M of the facility comes from ADB’s concessional Asian Development Fund to support investments in developing institutions and capacity, as well as feasibility studies. Interest for this portion is charged at 1% per annum during the eight-year grace period and 1.5% per annum subsequently, and carries a term of 32 years.

The Alternative Energy Development Board is the executing agency for the programme at the federal level, while at the provincial government level, the program will be executed via special purpose implementing agencies such Irrigation and Power Departments.