MID-MARSYANGDI PROJECT: German bank to release frozen funds

Kathmandu, July 4:

The German Development Bank (KfW) has agreed to release grant assistance it had pledged for the Mid-Marsyangdi Hydroelectricity Project (MMHP).

The move followed a meeting between the bank and a Nepal Electricity Authority (NEA) delegation in Germany recently.

The KfW, which is the only foreign agency funding the 160 megawatt project, had frozen further assistance when conflict ruled out work in the project. The freeze was announced in June last year.

Under a consensus reached between the KfW and the NEA delegation headed by Managing Director Arjun Karki, the bank is expected to release 9.5 million euros immediately. The NEA team also had MMHP Director Madhav Khakurel and NEA Deputy Managing Director (Finance) Uttar Mani Shrestha.

“The meeting with KfW was successful. It has agreed to continue funding. To begin with, the KfW will release 9.5 m euros immediately,” Shrestha told this daily today. The bank has also agreed to release more funds for the project after the NEA comes up with fresh budget estimates for the fiscal year 2007-2008.

Under the deal reached in the recent meeting, the KfW will send the fund to the government, which, in turn, gives it to the NEA in the form of a soft loan. Both the sides have also signed a memorandum of understanding under which the KfW will funnel an additional 16.6 m euros for speeding up work in the project that is already behind schedule by three years.

The revised commissioning date of the project is March 2008 and its revised total cost has touched Rs 24 billion.