Manila, Philippines (BBN)- Japan and the Asian Development Bank (ADB) will help develop a financing program for a US$240 million power transmission project that will enable Lao People’s Democratic Republic (Lao PDR) to export hydroelectric power to neighboring Viet Nam, where electricity demand is growing.

The Japan Special Fund, through ADB, will provide a $1 million grant while the governments of Lao PDR and Viet Nam will each allot $150,000 to complete the funding requirement for the program, an ADB press statement said on Friday.

The financing program will involve the preparation of two loans – one each for Lao PDR and Viet Nam. The loans will be structured and scheduled to suit the commercial operation schedule of the 11 hydropower developers that will provide the 1,000 MW of electricity targeted for export.

A suitable model and arrangements for the operation and maintenance of the transmission facilities to be shared by the two countries will also be prepared.

The power transmission project consists of four components. The first is construction of about 65-kilometer (km), 500 kilovolt (kV) double circuit transmission line, which will run from the Ban Sok substation in Lao PDR to the Viet Nam border.

The second component consists of about 100 km, 500 kV double circuit transmission line from the Lao PDR border to the Pleiku substation in Viet Nam. The third component will be a 500/230 kV Ban Sok substation in Lao PDR, while the final component will extend the Pleiku substation in Viet Nam.

Lao PDR has significant hydropower potential, estimated at 18,000 MW, but only 663 MW have been tapped so far.

Given soft domestic demand, most of Lao PDR’s hydropower is for export. Earnings from the exports, in turn, help fund projects that will bring electricity to rural areas, as well as social development and poverty reduction efforts.

With an average annual growth rate of 7.5 per cent over the past decade, Viet Nam is faced with a growing electricity supply deficit. Its Sixth Power Development Plan (2006-2020) estimates domestic power demand to rise 16 per cent annually from 2006 to 2010, by 11 per cent a year from 2011 to 2015, and by 9 per cent annually until 2020.

To meet power demand, Viet Nam is turning to its neighbors, including Lao PDR, to purchase electricity. In March, both countries signed a sale agreement involving as much as 5,000 MW by 2020, according to the statement.

BBN/SI/SS/AD-17October08-12:32 PM (BST)