ADB approves $185 million loan for Nepal hydropower plant

KATHMANDU (AFP) - The Asian Development Bank said on Tuesday that it had approved a US$150 million (S$185 million) loan for a giant hydropower plant to ease Nepal's chronic electricity shortages which lead to power cuts of up to 14 hours a day.

Electricity demand is growing at 10 per cent a year but a lack of investment has resulted in short supply, with loadshedding forcing homes and businesses across the impoverished nation to use costly and polluting diesel generators.

"Nepal has an energy crisis and this is affecting badly economic prospects. This energy project is a means to stop this crisis," Mr Zhai Yongping, director of the bank's south Asia energy division, said in a press release.

A vast network of fast-flowing rivers through the Himalayas offers huge hydropower possibilities to Nepal. But the country's total installed power generation capacity is just 700 megawatts - 1.5 per cent of its potential.

The 140-megawatt hydropower plant will be located on the Seti river, 150km west of the capital Kathmandu and will generate electricity through the year.

The US$500 million project, co-funded by the Japan International Cooperation Agency, the European Investment Bank and the Abu Dhabi Fund for Development, will also provide nearly 18,000 homes close to the plant with electricity.

Only one-third of households in Nepal are connected to the national power grid, with connection rates much lower in rural areas.