Manila, Philippines (BBN)– The Asian Development Bank (ADB) has agreed to lend up to $100 million to a privately owned gas-fired power plant in Pakistan that will help alleviate chronic power shortages which are undermining growth and poverty reduction.

ADB’s loan will fund construction of the 404 megawatt gross capacity Uch-II Power Project in Dera Murad Jamali in Balochistan Province, around 600 km north of Karachi, an ADB announcement said on Friday.

It will be located on surplus land at the existing Uch-I site and will be developed by International Power plc of the UK, a leading independent power generation company and the single largest private investor in Pakistan’s electricity sector.

Pakistan’s power deficit is weighing heavily on the economy. Regular outages affect all major urban centers, with shops and factories often closing early as a result of energy rationing.

The shortfall in supply has reached over 22 percent of the country’s peak demand and the problem is set to worsen without new generating capacity. Industry debt, which has undermined revenues for distribution firms and forced generating companies to halt, delay, or reduce payments to fuel suppliers to balance cash flows, has deterred private investment and hampered development of the power sector.

To address these problems, the government is seeking to improve the investment environment and to scale up the energy sector with support from independent power producers. ADB has played a pioneering role in attracting private capital to the power sector, including financing the country’s first private hydropower project and its first private wind power project.

The project will tap gas from the Uch field about 47 km from the site, with electricity supplied to the state National Transmission and Despatch Company under a 25-year take-or-pay power purchase agreement.

The tariff structure will ensure that electricity is both affordable, and that the project is financially viable, with the operator able to recover costs. The facility will also lead to new jobs in a remote and economically deprived area of Balochistan, with up to 800 jobs created during construction.

The plant is expected to take 30 months to build, with the project due for completion in September 2013.

BBN/SI/AD-21Jan11-9:07 pm (BST)