Kathmandu, February 4

The government signed a loan agreement worth $22.5 million, which is equivalent to Rs 2.51 billion, with the World Bank Group (WBG), for the implementation of the Power Sector Reform and Sustainable Hydropower Development Project, today.

The loan assistance covers World Bank’s assistance of $20 million and South Asia Water Initiative Multi-Donor Trust Fund of $2.5 million, according to the WBG.

The project aims at strengthening the capacity of the agencies involved in power sector, particularly in planning and preparing hydropower and transmission line projects following international standards, and best practices and improving the readiness of the power sector agencies in regulatory and institutional reforms.

The project consists of three components — preparation of hydropower and transmission line investment projects, studies and preparations for policy recommendation and sector reform, and capacity building for safeguard management and hydropower development.

The project will be implemented by the Ministry of Energy, Water and Energy Commission Secretariat (WECS) and Nepal Electricity Authority (NEA) in line with the project objectives and components it has covered.

The activities of the first component range from preparation of detailed engineering design and bid documents for the 335 megawatt Upper Arun Hydropower Project and 30 megawatt Ikhuwa Khola Hydropower Project along with environment and social impact assessment and hiring a panel of experts for this purpose. It also aims at implementing activities such as feasibility studies and preparation of basic designs, route survey, environmental and social impact assessments and bid documents for transmission line projects.

Likewise, the second component of this project focuses on activities like integrated water resource planning and management to guide sustainable hydropower development in the selected river basins using basin wide approach through WECS.

This component also includes the improvement of regulatory and institutional framework of water resources management and hydropower development by updating the water resource related Acts, preparation of NEA’s power expansion by updating the generation master plan, establishment and operationalisation of power trading company and restructuring of NEA for improved distribution business management and efficiency, including installation of smart meters at consumers premises.

The third component aims at supporting WECS for conducting strategic environment and social assessments for basin wide approach for hydropower development planning, preparing various regulations and procedures for such assessments, building capacity for managing the social and environment issues related to transmission lines, and carrying out project management activities.

The loan agreement was signed by Baikuntha Aryal, head of International Economic Cooperation Coordination Division at the Ministry of Finance and Takuya Kamata, country manager of the World Bank Group to Nepal on behalf of the Nepal government and WBG, respectively.

The loan amount will have a payback period of 40 years, according to Ministry of Finance.