THE ASIAN DEVELOPMENT BANK has approved a loan of as much as $120 million (P5.5 billion) to build a power plant in central Visayas.

In a statement, the ADB said the project is important to help boost the economy in the Visayas region. The bank said the region was economically promising but is poor because of weak investments. The area could not attract enough businesses because of underinvestment in power generation.

?A steady supply of power will help develop the local economy, creating jobs in manufacturing, tourism and other sectors that will boost incomes for local families in the region. At the same time, a reliable power supply will allow hospitals, schools and other public services to fully function,? said Joe Yamagata, deputy director general of the ADB?s private sector operations department.

Unlike usual loans provided by the ADB that go to the government, the loan will be granted to the private sector. In particular, the money will be extended to Kepco SPC Power Corp. (KSPC), a joint venture between Korea Electric Power Corp. and SPC Power Corporation of the Philippines.

Aided by the loan, the joint venture will build a 200-megawatt (MW) coal-fired power plant in Naga City, Cebu, on land already being used by the Naga power plant complex.

Coal-based generation is the most practical option to expand power supply in Cebu since further use of geothermal resources?already providing 70 percent of electricity in the Visayas?cannot provide enough immediate, reliable and low-cost power, the ADB said.

The first 100-MW unit of the plant is expected to be available by February 2011 and the second in May of the same year. KSPC will sell electricity from the plant to power cooperatives in Cebu and Negros and to the wholesale electricity spot market once it is set up in the Visayas.

?The project will help promote a competitive market for electricity and provide a model for future private sector investment in power generation, including renewables. These goals support the government?s efforts to reform the power sector,? Yamagata said.

The ADB said the energy project was consistent with the bank?s policy of helping Asia secure adequate power supply while promoting cleaner power generation.

The multilateral lender has been providing loans that support projects aimed at enhancing supply of clean energy and addressing the impact of climate change.

The problem of climate change has been a pressing concern, especially since the recent devastation caused by Tropical Storm ?Ondoy? and Typhoon ?Pepeng? that killed more than a thousand people and caused billions of pesos in damages.

Estimates by the World Bank said some P208 billion is needed for rehabilitation, relief and reconstruction in the aftermath of the calamities.