KATHMANDU, Nov 26: The government has prepared modalities for mega hydropower projects – the 1,200 MW Budhi Gandaki reservoir-based project and the 1,063 MW Upper Arun semi-reservoir-based project.
The government aims to construct both the hydropower projects with domestic investment. The proposed modalities include generating funding through issuance of initial public offerings of the Nepal Electricity Authority (NEA) shares to migrant workers and non-resident Nepalis and floating primary shares of the projects to the general public. Likewise, the issuance of energy bonds, taking concessional loans from the government and mobilization of funds generated from imposition of infrastructure development tax on petroleum products are also on the cards.
Commenting on the proposed financing modalities of the two projects, Minister for Energy, Water Resources and Irrigation, Kulman Ghising, on Tuesday, said that the investment modalities prepared after detailed financial analysis of both projects will be now forwarded for final approval.
Budhi Gandaki Hydropower Project is planned for construction across Dhading and Gorkha, with a net estimated cost of US$2.77 billion (around Rs 374 billion). The timeline for the completion of the project is eight years, and its total cost is expected to reach Rs 406 billion after including interest.
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The proposed financing modality sets a 70:30 loan-to-equity ratio. The government will hold an 80 percent stake in Budhi Gandaki Company Limited, the project’s promoter, while the Nepal Electricity Authority will own the remaining 20 percent.
The total investment of the government will amount to Rs 248 billion, including Rs 97.47 billion for equity and Rs 150 billion for concessional loans. As of now, the government has spent Rs 45 billion for the compensation of land plots of the locals affected by the project.
Likewise, the government will allocate 50 percent of the infrastructure development tax collected from imported petroleum products to the project.
Budhi Gandaki hydropower project is expected to generate 3.38 billion units of electricity, including Rs 1.41 billion units in the winter season and Rs 1.97 billion units in the rainy season. The tariff for the electricity generated from the project has been fixed at Rs 12.40 and Rs 7.10 per unit for winter and rainy seasons, respectively.
The project will be generating an annual income of Rs 31.48 billion, while the project's electricity generation license has been proposed to last for fifty years. If the project is completed within the stipulated period of eight years, electricity will be generated for the next 42 years.
On the other hand, the cost of the 1,063 MW Upper Arun Semi-Reservoir Hydroelectric Project is estimated at US $1.75 billion (about Rs 214 billion), which will include banks’ interest and other cost appreciation during the construction period. The proposed financing for the project will include 70 percent debt and 30 percent equity.
The Upper Arun project to be built in Bhotkhola Rural Municipality of Sankhuwasabha district will have 51 percent of the promoters’ shares of the provincial and local governments, NEA, Nepal Telecom, Employees Provident Fund, Citizens Investment Trust, Social Security Fund, HIDCL, insurance companies and subsidiaries of the NEA.
The remaining 49 percent of the stakes will be from migrant workers, non-resident Nepalis, employees of the promoter shareholder organizations, project affected people and the general public.
