PORT MORESBY, PAPUA NEW GUINEA - Papua New Guinea (PNG) and the Asian Development Bank today signed a loan worth $57.3 million to reduce power shortages in urban areas.

The Secretary for the Department of Treasury, Simon Tosali, Chief Executive Officer of PNG Power Limited Tony Koiri, and Officer-in-Charge of the Asian Development Bank's (ADB) Papua New Guinea Resident Mission Allan Lee signed the loan.

The signing ceremony was held at PNG Power's headquarters in Port Moresby. Julianna Kubak, Acting Deputy Secretary-Policy, Department of National Planning and Monitoring, was Master of Ceremonies for the event.

ADB's loan to the state power utility, PNG Power Ltd, will fund renewable energy facilities, including run-of-the-river hydropower plant and transmission systems in urban centers in PNG. Only about 10% of PNG's population of 6.5 million has access to grid power, which is largely confined to urban areas. Some provinces suffer regular outages, adversely affecting businesses and industry.

"As PNG's energy demands grow, ADB in partnership with PNG Power Ltd will improve access to energy by increasing the number of renewable energy facilities," said ADB's Allan Lee. "Households, schools and clinics as well as businesses will all benefit from a cleaner, more reliable power supply."

The ADB loan is part of a broader Town Electrification Investment Program approved by ADB's Board of Directors in late 2010 that will improve the power supply in provincial urban centers by replacing expensive diesel power generation with sustainable renewable energy power generation. It will also establish key transmission links along major population corridors that will boost connectivity outside the main provincial centers, and help address a significant investment hurdle for provincial governments responsible for rural electrification. The total cost of the Town Electrification Investment Program is estimated to be $150 million.

The projects to be implemented under the first tranche of funding include run-of-the-river hydropower plants in Northern Province and the Autonomous Region of Bougainville, as well as a 66-kilovolt transmission line in West New Britain. The transmission facility will provide access to about 1 megawatt (MW) of spare generation capacity from the Lake Hargy Hydropower Plant, as well as up to 3 MW of biomass-generated electricity from palm oil plantations.

Papua New Guinea joined ADB in 1971. It is ADB's largest partner in the Pacific in terms of loans for public and private sector development.