The regional lender said the financing will help the government reach its target of cutting system losses to 12 percent by 2020 from 14 percent in 2009.
The work will include new transmission and distribution lines, the construction and improvement of substations, and network upgrades to reduce system losses.
The package includes a 1.5 million US dollar credit to finance rooftop solar panels by private developers and a 1.5 million US dollar grant.
"Long-term, Sri Lanka’s challenge is to cut dependence on costly and polluting fossil fuels, and to make its power network more efficient," said Yongping Zhai, director of the energy division of ADB’s South Asia Department said in a statement.
"This project will support those goals, aid poverty reduction, and provide new economic opportunities in post-conflict areas."
The solar power rooftop panels and planned in areas ranging from the capital Colombo to the northern Jaffna peninsula targeting a total generating capacity of 1 MegaWatt by 2014.
The four year project will also help reach Sri Lanka's targets of increasing electrification to 100 percent by 2015 and increasing the share of renewable energy in the national grid to 20 percent by 2020, the ADB said.