Upper Arun Hydropower Project to be built on a Blended financing model - Business

Upper Arun Hydropower Project to be built on a Blended financing model

KATHMANDU – Being the second richest country in the world in water resources, Nepal’s development goal could be lies in the development of hydropower projects. As it was long been a promise and plan of various parties, leaders, and business communities but has never been implemented on time.

According to the current news in the press, Nepal Electricity Authority (NEA) announce the construction of the 1,061 MW Upper Arun Hydroelectric Project through a ‘blended financing’ model.

According to the NEA, the semi-reservoir hydropower project will have 30 percent equity investment from the power utility, the federal government, the provincial government, the local government of the affected area, local people from the district concerned, and the ordinary public. Similarly, the project will be constructed with 70 percent loan investment from donor agencies and Nepali banks and financial institutions (BFIs).

NEA Managing Director Kulman Ghising said the hydropower project will be the first in its type to be constructed under blended financing. According to him, the project will be expedited as a model project to construct in a fast-track mechanism.

The estimated cost of the project will be Rs 214 billion (USD 1.75 billion) which will include the banks’ interest payments and annual inflation rate. Of the amount, Rs 150 billion will be taken from the donor organizations, under the consortium of the World Bank. Of the remaining amount, Rs 53 billion will be taken from the BFIs.

Hydroelectricity Investment and Development Company will be leading the consortium of financing from the domestic BFIs. The construction of Upper Arun will be started in 2024 and the project is expected to start power generation in 2030.

The project is designed to run at full capacity for 6 hours a day during the 6 months of winter when electricity demand is high. The project will produce 4.51 billion units of energy annually.
About 30 percent of this energy will be produced in winter. The generated electricity will be transmitted to the national system through the proposed substation at Haytar in Sankhuwasabha through a 6 km 400 KV transmission line.
The Authority has advanced the 30 MW Ikhuwa hydropower project to be a part of the Upper Arun. Ikhuwa is also a project included in the Janata Hydropower Program.

If the political scenario becomes stable and the government will focus on the much-needed development of hydroelectric projects to construct, Nepal’s import of energy goes down which in term helps the country with much-needed financial resources would be fulfilled inside the country. It may help the nation to keep its cash to stay inside the country. Currently, Nepal’s GDP is mostly run by remittances, foreign aid, huge taxes on imported goods, and very low agro-produce inside the country. Hope this type of project continues to grow and Nepal could become one of the most developed countries in South Asia in our lifetime.