ADB lends $150m to help Inner Mongolia become energy efficient

Microfinance Focus, Aug 9, 2010: The Asian Development Bank (ADB) has today announced a $150 million loan to help the Inner Mongolia Autonomous Region of the People’s Republic of China (PRC) improve its aging coal-fired heating systems, making them more energy efficient and less polluting. The executing agency is the Government of Inner Mongolia Autonomous Region, with the project expected to be completed by December 2014.

The loan will be used for phase II of the Inner Mongolia Autonomous Region Environment Improvement Project. Along with closing down old heating systems and installing clean burning, cost-effective boilers, it will construct transmission and distribution pipelines and other related infrastructure. It will also build natural gas pipelines and other equipment to provide clean energy to Keyouqian, one of the Region’s poorest ‘banners’, or administrative areas.

The Inner Mongolia Autonomous Region has about 25% of PRC’s total coal reserves that it taps both for its own needs and to generate electricity for export to other areas. However, its district heating systems, many of which were installed in the 1970s, have become unreliable, costly and major contributors of harmful air pollutants, including sulfur dioxide and nitrogen oxides, which cause acid rain.

The second phase of the project will install more energy efficient and cleaner heating supply systems in municipalities that missed out on the initial work, with over 786,000 urban residents expected to eventually benefit from improved district heating. Coal consumption will be avoided by 1.59 million tons annually as a result of work carried out under both phases, energy efficiency in the district heating sector will rise by over 15%, and nearly 2.3 million people will indirectly benefit from improved air quality.

“The project will improve public health by reducing urban air pollution with the closure of small, inner-city boilers, the installation of more efficient heating equipment, the reduced use of household coal-fired stoves and reduced coal truck traffic through urban areas,” said Shigeru Yamamura, Energy Specialist in ADB’s East Asia Department.

To enable consumers to regulate the amount of heat they use, the project implementing agencies will install radiator control valves in apartments to encourage conservation, and use heat-measuring devices and consumption-based billing systems so that charges are based on actual heat consumption.

ADB’s loan from its ordinary capital resources makes up 45% of the total project cost of just over $333 million. The loan has a 24-year term with a grace period of 4 years and annual interest determined in accordance with ADB’s LIBOR-based lending facility. A further 35.5% of the cost will be borne by the implementing agencies in the form of equity, while domestic bank loans will provide the remainder.

© 2010, Microfinance News. All rights reserved. 2008-09