Kathmandu, Nov. 26: The investment modalities for the 1,200 MW Budhigandaki reservoir-based and the 1,063 MW Upper Arun semi-reservoir-based hydropower projects have been prepared.
The modalities have been designed to construct both hydropower projects through domestic investment.
Minister for Energy, Water Resources and Irrigation Kul Man Ghising has reviewed the proposed investment modalities, prepared along with the financial analysis of both projects, and directed the concerned authorities to submit them for necessary approval.
He said that since both projects have been under discussion for a long time, it is now necessary to finalise the investment modalities and move ahead with construction. It has been proposed to raise investment through the issuance of Nepal Electricity Authority (NEA) shares, energy bonds, and loans from banks and financial institutions.
Similarly, the modality proposes that the government provide concessional loans, invest funds collected from the infrastructure tax on petroleum products, and issue shares to Nepalis working abroad, non-resident Nepalis, and the general public.
Rs. 460 billion to be spent on Budhigandaki construction
The basic cost of the Budhigandaki Reservoir Hydropower Project, to be constructed in Dhading and Gorkha, is estimated at USD 2.77 billion (about Rs. 374 billion). The construction period of the project is eight years. The total project cost is Rs. 406 billion, including Rs. 32 billion in interest during construction.
The modality has been prepared so that the loan and equity (equity) ratio is 70 and 30 per cent, respectively, based on the total cost, including interest during the construction period.
The government will own 80 per cent of the shares in Budhigandaki Company Limited—the project developer—while the NEA will hold 20 per cent.
After the project is completed or reaches its final stage, the modality proposes reducing the debt burden by issuing a certain percentage of shares to the general public, based on suitability and feasibility, or by restructuring the government’s share. The government will invest a total of Rs. 248 billion in the project, including Rs. 97.47 billion in equity and Rs. 150 billion in concessional loans.
It has been proposed to convert the Rs. 45 billion invested in the project by the government so far into share investment in the company.
The government is also expected to invest the amount required for customs duties and value-added tax during the construction period.
Similarly, the modality proposes allocating 50 per cent of the infrastructure tax collected at customs points on petroleum imports to the project.
By reducing the current investment, the source of the government's investment in the project will have to be ensured.
The Authority will invest Rs. 24.37 billion for equity in the project.
The project will generate 3.38 billion units of electricity annually—1.41 billion units in winter and 1.97 billion in the rainy season. The proposed electricity purchase and sale rates are Rs. 12.40 per unit in winter and Rs. 7.10 per unit in the rainy season.
Once operational, the project is expected to generate annual revenue of Rs. 31.48 billion.
The proposal also seeks to extend the project’s electricity generation license to 50 years. If completed within eight years, the project will produce electricity for 42 years.
Estimated cost of Upper Arun Rs. 214 billion
Likewise, the 1,063 MW Upper Arun Semi-Reservoir Hydropower Project to be constructed in Bhotkhola Rural Municipality of Sankhuwasabha under the leadership of Nepal Electricity Authority (NEA) has an estimated cost of USD1.75 billion (about Rs. 214 billion) including interest and appreciation during the construction period.
Investment in the Upper Arun will be raised through 70 per cent debt and 30 per cent equity, according to the ministry. It has been proposed that 30 per cent equity will be considered as 100 per cent, with 51 per cent of it being institutional and 49 per cent being common shares.
Around Rs. 36.67 billion will be raised from promoter shareholders and Rs. 35.23 billion from general shareholders.
It is proposed that the 51 per cent promoter shareholders will be the provincial government and local levels, NEA, Nepal Telecom, Employees Provident Fund, Citizens Investment Trust, Social Security Fund, HIDCL, insurance companies, and NEA subsidiaries.
Arrangements have been made to have 49 per cent of the common shareholders as foreign employed and non-resident Nepalis, employees of the promoter shareholder organisations, project-affected people and the general public. Upper Arun Hydroelectric Limited has been founded for the construction of the project.
An investment of Rs. 168 billion will be made through co-financing from banks and financial institutions for the construction of the project.
After there was doubt about World Bank's investment, the government is going to take Upper Arun forward with the investment of banks and financial institutions within the country and Nepalis living in the country and abroad, said the ministry.
An agreement has been reached between the NEA, the project promoter company and banks and financial institutions for an investment of about Rs. 53 billion through co-financing in the project. The project will generate 4.53 billion units of electricity annually.
The project is currently undergoing pre-construction work. A 21-kilometre access road is being constructed from the powerhouse to the dam site of the geographically remote and complex project.
