Nepal | September 24, 2020

Construction of Upper Trishuli-1 hydro project to begin in Oct 2017

Himalayan News Service
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Upper Trishuli-1 Project featuresKathmandu, July 22

If things go according to plan, construction of 216-megawatt Upper Trishuli-1 hydroelectric project will begin in October next year.

Upper Trishuli-1 is a project being developed by Nepal Water and Energy Development Company (NWEDC), a joint venture between three Korean companies, the International Finance Corporation (IFC), the private sector lending arm of the World Bank Group, and a Nepali investor.

“We are now holding final round of negotiations on project development agreement (PDA) with the Ministry of Energy (MoE),” NWEDC CEO Bo-Seuk Yi told The Himalayan Times. “Although the deadline for PDA signing is expiring on October 17 this year, we hope to wrap up the talks and seal the deal by September.”

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NWEDC and the MoE began PDA negotiations in January 2014. Yet, the two parties have not been able to strike a deal so far because of frequent change in the government and energy ministers.

“We are very optimistic about finally signing the deal this time as most of the outstanding issues have been settled,” Yi said.

Once the PDA is signed, the project developer will start negotiations on power purchase agreement (PPA) with Nepal Electricity Authority (NEA), which will purchase energy generated by the project. “This will take around three months,” Yi said.

After this, NWEDC will formally begin financial negotiations with lenders that have expressed interest to finance the project.

Prior to the earthquake of April 2015, at least 12 international lenders, including the IFC, the Asian Development Bank, UK’s development finance institution, CDC, France’s PROPARCO and Société Générale, Japan’s Bank of Tokyo-Mitsubishi UFJ, and Dutch development finance company, FMO, had shown interest to finance the project.

During another meeting of international lenders held in April this year, at least eight foreign financial institutions, including Germany’s DEG, had expressed interest to finance the project, which is expected to generate 1.46 billion units of net electricity per year, of which 1.15 billion units would be generated in the wet season and 306.7 million units would be generated in the dry season.

“We will formally reach out to these lenders once we sign the PPA,” said Yi. The lenders will provide 70 per cent of the project cost of $550 million in credit to the project developers, while 30 per cent of the project cost should come in the form of equity from promoters.

“Once the process of mobilising the debt is finalised, we will reach financial closure with lenders. We will then begin construction work — most likely in October 2017,” Yi said, adding, “It’ll take around five years to complete project construction.”

Once the construction is complete, the developer will operate the project for a period of 30 years, as per the agreement reached with the government. The project will be returned to the government in a good condition after the 30-year concession period is over.

“We are now far behind the deadline, so we want to start construction as early as possible,” Yi said.d.


A version of this article appears in print on July 23, 2016 of The Himalayan Times.


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