Manila, Feb 3, 2007 (ABN Newswire) - Asian Development Bank (ASX: ATB) is preparing a project to expand hydropower development and extend access to electricity in Bhutan's rural areas through a US$1.6 million grant from its Japan Special Fund, financed by the Government of Japan.

Bhutan is the only South Asian country with a power surplus. Yet despite its abundant water sources and hydropower capacity, most people in the country do not have access to electricity. The Government aims to achieve 85.6% electrification by 2013 and develop 5,000 MW hydropower generation for export to India by 2020.

The technical assistance (TA) grant will prepare a project that will extend electricity to more than 8,900 rural households, providing missing transmission links between the eastern and western regions.

In addition, the TA will accelerate hydropower development, through which Bhutan can generate surplus power to export to India. Power exports account for Bhutan's largest source of Government revenue, generating financial resources for socioeconomic development such as rural electrification.

"Rural electrification using hydropower is beneficial because electricity is cheaper than kerosene for lighting, it is environment friendly, and it has none of the health hazards associated with alternative fuel sources," says Kaoru Ogino, an ADB Energy Specialist.

"Accelerating hydropower development for export will be of strategic significance to Bhutan's economy. Clean energy development and its trade will also improve energy efficiency and foster cross-border economic cooperation in South Asia."

The TA will promote private participation in hydropower development through public-private partnerships and the involvement of independent power producers. It will also support the development of hydropower at Dagachhu as a demonstration project.

ADB has provided three consecutive loans for rural electrification since 1995, covering more than 19,250 households.

The Government will contribute $310,000 toward the TA's total cost of $1.91 million. The Department of Energy is the executing agency for the TA, which is due for completion around April 2008.