ISLAMABAD -  Pakistan and Asian Development Bank (ADB) on Tuesday signed loan and project agreement worth $125 million for Second Power Transmission Enhancement Investment Programmr (Tranche-1).

Tariq Bajwa, Secretary Economic Affairs Division (EAD), and Werner E Liepach, Country Director ADB, signed the loan agreement. The loan is part of $810 million loan facility for Pakistan to help the country improve its dilapidated power transmission infrastructure not capable of lifting additional power generation load. The loan facility will help fund the staged rehabilitation and expansion of the transmission network, increasing transmission capacity and energy efficiency and security. It will also support government efforts to develop a more transparent and efficient power sector by promoting reforms in the National Transmission and Despatch Company Limited, and the sector’s newly established commercial operator, the Central Power Purchasing Agency (Guarantee) Limited. ADB’s facility will be delivered in tranches, implemented from 2016 to 2026.

Power shortages are a major obstacle in Pakistan’s economic development. With demand for electricity outpacing supply, inefficient and inadequate transmission and distribution systems are key bottlenecks in the development of the energy sector that is stifling growth and threatens social strife.

The government has started around 10,000 megawatts electricity projects to eliminate loadshedding by March 2018. However, the country’s transmission system at present is not capable of lifting the additional load. Most of the 500 & 220 kV grid stations located in southern areas of the country; particularly in Sindh and Baluchistan provinces are in operation since long.

“This investment program will expand and reinforce Pakistan’s power transmission system, enabling it to provide a reliable and quality service capable of meeting increasing customer demand and supporting economic growth. The investment program consists of staged physical investments in transmission system, including the rehabilitation, augmentation, and expansion of transmission lines, substations, and supporting infrastructure. The physical investments will support evacuation of new generation to improve system reliability and quality of supply through reinforcement and improved monitoring and control and will meet increasing consumer demand”, an official handout released by Ministry of Finance stated.

The capacity development component will further improve the financial management regulatory relations planning project management, and procurement capacity of the transmission system owner and operator, the NTDC, and the sector’s newly established commercial operator, the CPPA-G.

 These investments will increase institutional efficiency, cost recovery, competition, transparency and good governance within the power sector.

ADB is Pakistan’s largest development partner in the energy sector with investments including five multi-tranche financing facilities, as well as providing support for policy reforms, energy planning, preparation of feasibility studies, capacity development, and promotion of regional power and gas trading initiatives.