The Nepali Congress government, formed after the political changes of 2046, had introduced a policy of bringing private investment into the hydropower sector. During the Panchayat period, about 2.500 megawatts of electricity was generated. Most of the rural areas of the country were not electrified.

Electric power was needed to operate large industries and factories. The private sector was excited after the government implemented the policy of open market economy in the 1950s. Realizing that electricity generation was not possible with Nepal Electricity Authority and government investment alone, attempts were made to bring in the private sector. At that time, banks and financial institutions had just started opening with private sector investment.

Nepali private investors were not in a position to invest large amounts of money in the hydropower sector. Therefore, the Arun III Hydropower Project, Khimti and Bhotekoshi were put forward as a government effort to build power projects by bringing in foreign investment. The first effort was Arun.

However, Arun, which was being prepared to be built with a loan from the World Bank, was almost impossible to build due to continuous opposition from within the country. Especially after the anti-Arun activities increased in the name of Nepal's leftist political parties, national/international social organizations and local interest groups, the government's efforts were ineffective. The anti-Arun activities were likely to send a message that there was no environment for foreign investment in Nepal. Foreign investment was brought in to the Khimti Hydropower Project against that backdrop.

Foreign assistance was raised for the construction of the Khimti First Hydropower Project to generate 60 MW of electricity from the border rivers of Dolakha and Ramechhap. It was decided that the International Finance Corporation, Asian Development Bank, Export Finance and Nordic Development Fund would invest 126.283 million US dollars and 30 million Norwegian kroner for the construction of the project. An agreement was signed in London in 2052 Magh between Himal Power Limited and international lenders to provide the loan.

Himal Power Limited, which was given the responsibility of constructing the project, started the construction of the project with the goal of producing 12 MW of electricity on a trial basis in 2056 Baisakh. After the international lenders provided the first installment, the construction of the project began in 2053 Asar. According to the agreement for the project, ABB Kraft, Butwal Power Company, Kverner Energy AS, Statkraft SF had invested in shares.

The Asian Development Bank, International Finance Corporation, Esport Finance, and NORAD Norwegian Kroner had invested as long-term loans. Similarly, the Asian Development Bank, International Finance Corporation, and Nordic Development had invested as subsidiary loans. Himal Power had stated that for the first time in Nepal, there was foreign private investment in power generation in Khimti.

Khimti is the first hydropower project to pay a fully commercial interest rate. The project, which will have 5 units with a capacity of 12 megawatts of Khimti Pratham, which will generate 350 million kilowatt hours (units) of electricity, aims to connect all units to the national transmission grid by Shrawan 2056.

The civil construction and engineering design work costing US$ 4,889 was awarded to a consortium including Nepal's Himal Hydro and General Construction and Norway's Statkraft Unleg. The project, which was planned to be built jointly by the Foreign Investment and Butwal Par Company, had an agreement to purchase the electricity generated from the project in US dollars. There was also opposition to the project being built at high interest rates in US dollars in the name of attracting private investment in Nepal.

But the government had moved ahead with the project construction to send a message that there was an investment environment in Nepal and to solve the problems facing electricity supply. The project had an agreement with the government to hand over 50 percent ownership to the authority in 2021. The news that the construction of a power project with foreign investment from the private sector had started in Nepal for the first time was published by Kantipur Daily on 14 Asad 2053 under the title 'Khimti First Hydropower Project Starts'.