The Asian Development Bank (ADB) said on Thursday that it has entered a loan agreement with Paris-based Dalkia Group to finance a series of projects in China to improve energy efficiency and reduce air pollution.

According to the agreement, the funding support comprises a loan of up to 1.4 billion yuan (US$201.3 million) from the ADB and another loan of up to 1.4 billion yuan funded by international or local banks under participation agreements with the ADB.

The loans will be used to finance a series of district heating, district cooling, and cogeneration projects, the ADB and Dalkia Group said in a joint statement. This is ADB's first private sector district energy project.

ADB funding will be extended to joint ventures established by Dalkia Asia and local partners to finance rehabilitation and expansion of district energy and cogeneration infrastructure, according to the statement. District energy refers to the production of steam, hot water or chilled water at a single central utility plant for distribution to many buildings.

Dalkia's joint ventures will manage district energy system and deliver reliable heat supply to residential, industrial and commercial customers.

"This project will bring clean, reliable, safe, and high- quality heating and cooling services to the municipalities, and expand private sector investment in district energy system projects in the PRC (People's Republic of China)," said Hisaka Kimura, ADB Investment Specialist.

Heating systems and coal-fired stoves consume almost half the country's coal and are the largest single-point sources of urban air pollution. District energy systems are one of the most effective ways to maximize energy efficiency of heating, cooling and the electricity generation process, improving local air quality and helping to slow down global warming by reducing carbon dioxide emissions.

"The ADB aims to promote public-private partnership in the district energy sector in China and other countries in Asia by supporting private sector investors. This project will demonstrate district energy projects can attract more private sector companies, municipalities and financial institutions," said Jo Yamagata, Director of ADB's Private Sector Operations Department.

"We are proud of this partnership, which will allow us to develop our district heating business in the PRC. Building on our experience in Europe, where we are a leading provider of energy and environmental efficiency services, we will be able to offer solutions aligned with the changing environmental concerns of the Chinese government," said Philippe Beaute, Dalkia's Chief Finance Officer.

(Xinhua News Agency June 20, 2008)