Thursday, 17 April 2008 1:01 AM

Australia and ADB Pilot a Financing Innovation to Support Good Governance

MANILA, PHILIPPINES (16 April 2008) - The Government of Australia and the Asian Development Bank (ADB) are piloting an innovative mechanism to support power sector reforms in Samoa.

The ADB has approved a financing package to support the Electric Power Corporation's (EPC) eight-year investment plan to improve the reliability and security of power supply. The investment plan is accompanied by power sector reforms to ensure that the investments benefit end-consumers.

Under the financing package, ADB will provide a loan to Samoa, while the Government of Australia, through its international aid agency AusAID, will provide grant resources under a "loan buy down mechanism" in support of agreed reforms in the power sector. As Samoa adopts these critical reforms, the Australian grant will be used to 'buy down' part of the Samoan project debt.

"ADB with the Australian Government are pioneers in using the loan buy down mechanism, which is a unique opportunity for countries like Samoa to access financial resources at highly attractive terms upon implementation of key reforms," said Philip Erquiaga, Director General of ADB's Pacific Department.

The Government of Australia has committed financing of A$ 4 million under the loan buy down mechanism. The funds will be invested by ADB until a series of reform measures have been achieved in Samoa, after which the loan buy down will be triggered. Under the agreed terms of the buy-down, the specific reform measures will be achieved by the end of 2012.

"Australia, together with its development partners, is committed to promoting good
governance, transparency and reform in the power sector, and the loan buy down system is an excellent vehicle to help ensure these goals will be achieved," said Matt Anderson, Australian High Commissioner to Samoa.

"The project will also promote renewable energy and conservation and reform the power sector to give more sustainable and affordable electricity services to all consumers," Mr Anderson said.

As the Australian Government and ADB pilot the loan buy down mechanism in Samoa,
opportunities to expand it to promote good governance and reforms in other ADB projects in the region, are being explored.

The Government of Samoa has embarked on critical reforms to improve the quality of
power services to consumers in Samoa. The reforms aim at improving the operational efficiency and financial performance of the government-owned Electric Power Corporation (EPC), and establishing effective price and technical regulations to promote transparency, contestability and private sector participation. The Government of Samoa, with the support of ADB, will also seek to promote the development of clean energy resources and energy conservation.