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The International Finance Corporation (IFC), the private sector arm of the World Bank Group, has committed about US$49mn of loan and equity financing to India’s AD Hydro Power – one of the first hydro power plants to be financed on a merchant basis in South Asia. The project will contribute to the expansion of hydro-electric generation capacity and help alleviate peak electricity shortages in North India.

IFC’s financing consists of a loan of up to US$42mn and equity of up toUS$7mn for a 10% stake in the project. IFC’s loan will have a maturity of 15 years and will be denominated in Indian rupees.

The project involves the construction, operation, and maintenance of a 192MW run-of-the-river hydro-electric power plant in the Kullu district of Himachal Pradesh, and the construction of a 185km, 220kV transmission line that will extend to the interconnection point on the regional grid.

The power plant will utilise the perennial flows of the Allain and Duhangan rivers and combine the flows through two underground head race tunnels to feed a single powerhouse near Prini village. The estimated construction period is about four years and the total cost is about US$195mn.

The project sponsor is Malana Power Corporation Limited which is owned 51% by the LNJ Bhilwara group and 49% by Statkraft Norfund Power Invest of Norway (SN Power).

The financing of low-impact hydro projects is a cornerstone of IFC’s strategy to increase its support for least-cost renewable energy. It is also consistent with the strategy of the Government of India to improve the hydro thermal balance in the country through the development of hydro-electric plants, particularly run-of-the-river, which generally have lower environmental and social impacts.

The project will have a number of other significant positive impacts, including employment creation during construction and operation, reduction of greenhouse emissions, and a community development programme aimed at benefiting the communities affected by the project.