Kathmandu, April 4

Representatives of at least three international lending institutions have arrived in Nepal to appraise the 900-megawatt Upper Karnali hydroelectric project located in Surkhet, Achham and Dailekh districts. If things go according to plan, these lenders will finance the project being built by GMR Energy of India.

“Representatives of the International Finance Corporation, the private sector lending arm of the World Bank, the

European Investment Bank and the Asian Development Bank (ADB)’s Private Sector Operations Department have arrived in Nepal to take stock of the hydro project,” a reliable source said.

During their stay here, they will review the country and project profile. “They are also scheduled to meet with Prime Minister KP Sharma Oli and Finance Minister Bishnu Prasad Paudel,” the source added.

The government had formally signed Project Development Agreement on Upper Karnali hydroelectric project with GMR Energy on September 19, 2014. As per the agreement, the developer has to reach financial closure within two years of signing the pact.

This means GMR has to arrange all necessary funds to build the project within September. GMR had initially said it would cost around $1.5 billion to build the project. It had also said the project will have debt-equity ratio of 75:25. This means 75 per cent of the money required for the project would be in the form of bank loans, while the rest will be contributed by promoters.

The project is being developed under 25-year build-own-operate-transfer (BOOT) model. As per this model, the developer will have to hand over the project, including transmission lines, to the government free of cost and in good operating condition after 25 years of electricity generation.

But during these 25 years, Nepal will receive 12 per cent free energy, or around 108MW of electricity, from the project. Also, GMR is offering 27 per cent free equity in the project to Nepal.

Expected financial benefits to Nepal in terms of revenue from taxes, royalties, free energy and free equity will stand at around Rs 300 billion, according to the Investment Board Nepal (IBN), which is overseeing implementation of the project.

A total of 50 per cent of royalties generated from the project will go to the Treasury, 38 per cent to the affected region and 12 per cent to the affected districts — Surkhet, Achham and Dailekh.

As per the IBN, projects of this scale generally create 2,000 direct jobs during the peak construction period.

Taking stock of Upper Trishuli-1

KATHMANDU: Representatives of the International Finance Corporation (IFC), the private sector lending arm of the World Bank, the European Investment Bank and the Asian Development Bank (ADB)’s Private Sector Operations Department, who have arrived in Nepal, are expected to take stock of 216-megawatt Upper Trishuli-1 Hydroelectric Project as well, as very reliable source said. If things go according to plan, these lenders will finance this project. The Upper Trishuli-1 project is being developed by Nepal Water and Energy Development Company, a joint venture between three Korean companies, the IFC and a Nepali investor. The company had started negotiations on Project Development Agreement with the Ministry of Energy in January 2014. But it has not been able to wrap up the talks due to reluctance shown by Nepal Electricity Authority (NEA) to purchase electricity generated by the project in US dollars.