The Asian Infrastructure Investment Bank (AIIB)'s Board of Directors has approved a loan of up to US$90 million for a hydropower project in Nepal, its first project in the country.

The Upper Trishuli-1 Hydropower Project will increase the country's power generation by almost 20 percent, helping to reduce acute power shortages in Nepal, according to a statement from the multilateral development bank.

The Upper Trishuli-1 Hydropower Project is a 216-megawatt greenfield run-of-river hydropower plant to be developed on the Trishuli river under a build-own-operate-transfer model.

The AIIB has also provided Nepal with US$900,000 for the proposed Tamakoshi V Hydroelectric Project and one million dollars for the proposed Power Distribution System Upgrade and Expansion Project from its Project Preparation Special Fund which provides grants to support the preparation of projects in eligible AIIB members.

"AIIB's investment will provide much-needed, long-term financing for a vital infrastructure project," said AIIB Director General Dong-ik Lee.

"We are confident that our investment will demonstrate the viability of Nepal's sustainable energy sector to other potential private-sector investors," Lee said.