ADB to support clean energy projects

The Asian Development Bank (ADB) plans to issue its inaugural Clean Energy Bond to support its clean energy projects in Asia and the Pacific.

A traditional Sri Lankan meal being prepared by women.

The Clean Energy Bond is expected to have four tranches, one each denominated in Australian dollars and Turkish lira and two tranches in Brazilian real.

It will carry tenors of between 4 and 7 years and will be issued in September. ADB will provide assistance to clean energy projects in an amount at least equal to the amount raised by the Clean Energy Bond.

The issuance, targeted at Japanese retail investors, will be arranged through HSBC Securities (Japan) Ltd. and will be distributed nationwide by more than 20 securities firms.

The planned bond issue follows the successful sale in April of ADB's inaugural Water Bond, which is supporting the ADB's work in the water sector in Asia and the Pacific. Rapid economic expansion in the region has put immense pressure on resources and the environment. The use of coal and oil and other carbon-based fossil resources to meet the region's growing energy needs has added to the release of greenhouse gases that contribute to global climate change.

At the same time, insufficient energy investment in the region is preventing many developing countries and individuals from reaching their full potential. A quarter of the population of Asia and the Pacific - or more than 800 million people - still have no access to basic electricity services, while some 1.8 billion people continue to rely on traditional biomass fuels for cooking and heating.

Clean energy is a crucial element in the fight against poverty in Asia and the Pacific. To put the region on a path to sustainable and inclusive economic growth, we are committed to supporting clean energy projects in the region that avoid harming people or the environment," said ADB President Haruhiko Kuroda.

Between 2005 and 2009, ADB's total clean energy investments exceeded $5 billion.

Additionally, the ADB is targeting $2 billion a year in clean energy investments by 2013 focusing on renewable energy projects such as biomass, wind, solar, hydro, and geothermal as well as on energy efficiency projects in industrial, commercial and residential sectors.

Through its clean energy program, ADB intends to help the region meet its energy security needs, facilitate a shift to a low-carbon economy, and ensure everyone in the region has access to energy.

In another development ADB is extending a $100 million equivalent loan for a cross-border electricity initiative between India and Bangladesh that will provide impetus for increased power trading in South Asia.

ADB's Board of Directors have approved the loan for the Bangladesh-India Electrical Grid Interconnection Project.

The funds will be used to build a 40-kilometre 400-kilowatt transmission line, along with a high voltage direct current substation and connecting loop, linking the western electrical grid of Bangladesh with India's eastern grid.

Around 500 megawatts of power are expected to flow into Bangladesh by 2012 as a result of the project, with the possibility of more in the future.

Bangladesh's fast growing economy has seen power demand sharply outstripping supply, resulting in frequent power cuts, voltage fluctuations and losses in economic output estimated at nearly $1 billion a year. While the economy has grown by an average of 6 percent a year since 2005, less than half the population of 156 million has access to power.

Unreliable power supply has hurt industry and will hamper efforts to provide better economic opportunities and social services for the poor.

The project will signal a new era in energy cooperation in South Asia and is likely to herald further power trading agreements, resulting in the more effective use of existing energy resources in the region, said Sultan Director General of ADB's South Asia Department Hafeez Rahman.

"Connecting the two grids will demonstrate the substantial economic benefits that come from enhanced regional cooperation and help to address energy gaps across the region," Rahman said.

"It will also allow Bangladesh to reduce its current reliance on stop-gap power measures such as rental generation facilities, and help to generate jobs and new business opportunities by providing a more reliable supply of power to industries." Staff from the Power Grid Company of Bangladesh will be trained to manage the new facilities, while officials of the state-owned Bangladesh Power Development Board will learn cross border power trading skills.

ADB's assistance from its concessional Asian Development Fund makes up 63 percent of the total investment cost of $156.8 million.

The loan has a 32-year term including a grace period of 8 years, with interest charged at 1.0 percent per annum during the grace period and 1.5 percent per year for the rest of the term.

The balance of the investment of $58.6 million will be funded by the Government of Bangladesh, while interconnection facilities on the Indian side will be financed, developed and operated by India.

The Power Grid Company of Bangladesh is the executing agency for the project, which is due for completion in December 2012.

Courtesy ADB