The Asian Development Bank (ADB) and the governments of Japan and Australia are providing $88 million in financing to support the development of Samoa's power sector.

ADB is extending a $26.61 million loan and a $15.39 million grant for the Power Sector Expansion Project. The Japan Bank for International Cooperation (JBIC) is providing a $38 million loan, and Australia is extending an $8 million grant that will be used as counterpart financing by the government of Samoa in the project.

Government-owned Electric Power Corp. (EPC) will cover the balance of $12 million to complete the funding for the project. The company is responsible for the generation, transmission and distribution of electricity throughout Samoa.

The project will improve the cost effectiveness, quality and reliability of electricity services to the people of Samoa, and involves wide stakeholder and donor participation to improve the regulatory environment for the power sector.

"Reliable power supply is essential for enhancing the quality of life for all Samoans," said Philip Erquiaga, Director General of ADB's Pacific Department. "Good governance and transparency in the power sector are essential for ensuring that investments are cost effective and translate into benefits for electricity consumers.

The project also includes support for EPC's investment plan, improvements to the financial and operational performance of EPC and promotes energy efficiency and conservation as well as the development of renewable and clean energy.

"This project will be the first application of Japanese resources to an ADB cofinanced project under the Accelerated Cofinancing Scheme with ADB (ACFA). ACFA has greatly strengthened joint collaboration between JBIC overseas economic cooperation and ADB and will facilitate rapid and efficient implementation of Japanese official development assistance loans," said Mr. Erquiaga. "At the same time, this project is the first application of a new loan buy down mechanism (LBM) with the government of Australia, which will assist in promoting governance and regulatory reforms in developing countries."

Australia is providing an additional A$4 million financing for a loan buy down mechanism to buy down a portion of ADB's loan. The LBM will be triggered as the Government of Samoa achieves specific reform measures by the end of 2012.

"The project supports EPC's 2008-2015 investment plan, which aims to improve the company's collection performance, remove transmission congestion to enhance the reliability and quality of supply and expand capacity to meet growing demand," said Carol Litwin, Senior Energy Specialist of ADB's Pacific Department. "The investment plan involves a series of investments in power generation and transmission, and institutional and power sector reform measures to ensure the benefits derived from the project reach consumers."

Through the project, Samoa will also establish an effective regulation of the power sector, develop a strategy to promote energy efficiency and conservation and develop clean energy resources.

Although the Samoan economy has been growing, the country remains import dependent and vulnerable to global price increases and climate change. The financing arrangements for the Power Sector Expansion Project will ease the macroeconomic impact of the large financing requirements to ensure reliable electricity supply in Samoa. Climate change adaptation is incorporated under the project to reduce to exposure of transmission assets to cyclones and reduce the impacts on consumers of cyclone damage.