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ADB agrees $130m boost to Sri Lanka power sector

1 November 2002 – The Asian Development Bank approved Thursday two loans to Sri Lanka totalling $130m under the Power Sector Development Programme. The funds will also help provide new distribution lines and connections in the island’s rural areas, while improving existing networks.

“The government seeks to provide electricity for 80 per cent of the population by 2010, but to achieve this it needs to better manage the power utility and reduce inefficiencies in power delivery,” said the Manila-based bank.

The bank said a programme loan of $60m would support reforms that included establishing independent regulatory and tariff setting mechanisms, introducing competition and commercialization and encouraging private sector participation.

“It will also address the drain on national resources arising from the financial deterioration of the state-owned utility, Ceylon Electricity Board, CEB,” it said.

This loan will be sourced through ADB’s ordinary capital resources with a term of 15 years, including a grace period of three years.

The bank also said a second project loan of $70m would help fund expansion and modernization of CEB’s transmission and distribution systems.

The loan will be from the ADB’s concessional Asian Development Fund, with interest set at 1 per cent per annum during the grace period and 1.5 per cent per annum subsequently. The term is for 32 years including a grace period of eight years.

ADB said the loans follows a technical assistance grant of $800000 approved earlier this year to help “unbundle” CEB into generation, transmission and distribution companies.

The project is due for completion by Dec. 2006.