The Asian Development Bank (ADB) is providing loans of up to $350 million for transmission system upgrades to help the Indian state of Himachal Pradesh take greater advantage of its vast hydropower resources.

The ADB Board of Directors has approved the multitranche financing facility for the Himachal Pradesh Clean Energy Transmission Investment Program, with a first investment of $113 million. It will help expand the supply of power, both in and outside the state, as well as promoting job opportunities, increased social services and poverty reduction.

Himachal Pradesh, a small mountainous state with five major rivers, has about a quarter of India's total potential hydropower resources. It wants to scale up generation, but its transmission facilities in certain locations are currently unable to handle large amounts of additional power. The program will fund badly needed new high voltage lines and other transmission infrastructure to allow the state to increase output to meet growing local and national demand for electricity.

"This program will not only benefit Himachal Pradesh, but will also enable a clean, indigenous source of energy to flow to other parts of the country where demand is rising as a result of strong economic growth," said Andrew Jeffries, a Senior Energy Specialist at ADB's South Asia Department. "The additional transmission capacity to be added is sufficient to transmit power to electrify over 456,000 homes."

The recently formed stand alone transmission utility, HP Power Transmission Corporation, will also get assistance to strengthen its financial and asset management capabilities, allowing it to press ahead with a transmission development plan which seeks to support current and future investment in new hydropower facilities.

The first tranche loan from ordinary capital resources, scheduled for 2011, has a 25-year term, with a grace period of five years and interest determined in accordance with ADB's LIBOR-based lending facility. Remaining funds are expected to be disbursed in two further tranches through to 2014. The Government of Himachal Pradesh will provide counterpart funds of almost $88 million for a total program investment cost of about $438 million.

ADB is also extending a technical assistance grant of $600,000 from its Technical Assistance Special Fund that will provide support to HP Power Transmission Corporation to implement and plan future projects.

HP Power Transmission Corporation will carry out the program which is expected to be completed in December 2017.