ADB is extending a loan of US$16.7 million equivalent, along with a separate grant of US$28.1 million, from its concessional Asian Development Fund resources, for the Power Sector Improvement Project. The funds will help the country address weak corporate and financial management in the sector, along with high system losses linked to ageing and dilapidated infrastructure.

The Central Asian country generates over 95% of its power from its abundant hydropower resources, but years of neglect since independence have left facilities in a poor state, with much of the Soviet-era equipment now obsolete and prone to breakdown. Along with substantial transmission and distribution losses, power tariffs need to be revised and the financial performance of utilities is poor. These factors have undermined domestic supply, as well as the regional power trade, with the Kyrgyz Republic being the largest net power exporter of the Central Asian Power System.

The project will introduce an automated metering and data acquisition system to help reduce system losses, making more electricity available for domestic use. Funds will also be used to rehabilitate dilapidated substation equipment and to install a supervisory control system which will improve the efficiency of dispatched electricity and cut technical losses.

A plan to bolster the corporate and financial management capacity of the state-run National Electric Grid of Kyrgyzstan will be drawn up, and a study will be carried out to devise a settlement mechanism for wholesale electricity transactions to improve the commercial performance of utilities, and to streamline contractual arrangements for regional power trade.

“The project will assist the government’s efforts to bring transparency and efficiency to the energy sector. It will improve the commercial and operational efficiency of utilities to make domestic supply of power more reliable and secure, which in turn will help boost regional power trade in electricity in Central Asia,” said Takafumi Kadono, Energy Specialist in ADB’s Central and West Asia Department.

The loan has a 32-year term, including an 8-year grace period, with interest set at 1.0% per annum during the grace period, and 1.5% for the rest of the term. The government and the National Electric Grid of Kyrgyzstan will provide counterpart finance of US$11.2 million for a total project cost of US$56 million.

The Ministry of Energy and the National Electric Grid of Kyrgyzstan will execute the project which is expected to be completed by December 2013.