The loan will help finance an approximately 80-megawatt power plant located downstream of the Mangla Dam on the Jhelum River in Azad Kashmir, says a statement issued on Wednesday.
This is ADB's first proposed assistance to a private sector hydropower project in Pakistan and the first such project to be developed in the region.
The New Bong Escape Project, so-called because of its position on the escape channel from the existing Mangla Power Station, will be a "run-of-the-river'" scheme involving no new dam or reservoir. This will thus have minimal environmental and social impacts. The power generated by the project will be fed into the national grid.
The project company, Laraib Energy Limited, is owned by a subsidiary of Ranhill Berhad, a Malaysian engineering and utility asset-owning company listed on the Kuala Lumpur Stock Exchange, and by various local and international business interests. The project is expected to begin construction shortly and is scheduled to begin commercial generation of electricity by the beginning of 2009.
"The project, while far enough from the epicenter, should bring job opportunities and will help upgrade infrastructure in an area where both are much needed," says Michael Barrow, an ADB Principal Structure Finance Specialist.
Together with the ADB loan and the sponsor equity, the project is expected to be financed with loan facilities from the Islamic Development Bank and commercial banks.
"This project represents a number of important firsts for ADB and for the region," Barrow said, adding: "It will be the first private sector hydropower project in Pakistan which should lead the way for many similar schemes."
It will be the first large-scale, private sector infrastructure project in Azad Kashmir and will also be the first private sector co-financing between the ADB and the IDB."