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The Asian Development Bank (ADB) will help boost Cambodia’s access to affordable and reliable electricity through a US$44.3mn loan approved for the installation of a power transmission line from Viet Nam to Phnom Penh.

The Greater Mekong Sub-region (GMS) Transmission Project, the first component of a master plan to interconnect the power sectors of the GMS countries, will install a 200MW capacity transmission line from Phnom Penh to Chau Doc in southwest Vietnam. It will also build substations in Takeo and West Phnom Penh. A new substation in Chau Doc with a transmission line to an existing substation in Thot Not will be financed by the World Bank.

The project will enable Cambodia to import up to 1,490GW-hours of electricity per year from Vietnam at a rate of US$0.078 per kW-hour. This is cheaper by almost half than the average cost of electricity in Cambodia, for which the average tariff is US$0.15 per kW-hour.

“The present high cost of electricity is one of the key obstacles to economic growth in Cambodia,” says Michael Bristol, an ADB project engineer. “The country needs an additional source of power at a lower cost, such as imports from Vietnam via a transmission line.” Cambodia’s power system suffers from insufficient generating units and the lack of a transmission grid, resulting in expensive power rates for consumers.

The state-owned Electricite du Cambodge (EDC), which has small generating units and is aided by independent power producers (IPP), supplies electricity that is fairly reliable but at such steep rates that many large consumers opt to generate their own electricity. Provincial towns and rural areas rely on even more expensive and less efficient generating units that provide erratic supply. Cambodia’s electrification ratio is among the lowest in Asia with 15% of all households and only 7% of rural households having access to power.

The cheaper electricity EDC can import from Vietnam will reduce the average cost of power. The transmission line will enable EDC to meet 60% of the electricity demand in greater Phnom Penh, and allow it to expand the distribution supply network to surrounding areas.

“It is hoped that this will initiate a virtuous cycle of lower costs that will allow EDC to become financially viable and to invest to meet growing demand,” says Bristol.

“A more affordable and reliable power supply will encourage companies currently operating their own generators to switch to EDC’s system. As demand grows, EDC will be able to use larger, more efficient generating units, and eventually reduce tariffs to levels competitive with the rest of the region.”

EDC is the executing agency for this project, which is due for completion in June 2008.