The Upper Arun project, which will be built under the leadership of Nepal Electricity Authority, will be financed by 70 percent debt and 30 percent equity. It is proposed that the 30 percent equity will be considered as 100 percent, with 51 percent of it being incorporated and 49 percent being common shares.
What you should know
As the World Bank has not formally decided on the investment in the 1,063 MW Upper Arun Hydropower Project, the government has prepared an investment modality (framework) to build it with domestic investment and has moved the process forward.
The Upper Arun Semi-Reservoir Hydropower Project to be constructed in Bhotkhola Rural Municipality of Sankhuwasabha has an estimated cost of $1.75 billion (about Rs. 214 billion) including interest and appreciation during the construction period.
The Upper Arun project to be constructed under the leadership of Nepal Electricity Authority will be financed by 70 percent debt and 30 percent equity. It is proposed that 30 percent equity will be considered 100 percent, and 51 percent of it will be incorporated and 49 percent will be ordinary shares. Rs. 36.67 billion will be raised from the founding shareholders and Rs. 35.23 billion from the ordinary shareholders.
It is proposed that 51 percent of the founding shareholders will be the provincial government and local levels, the authority, Nepal Telecom, Employees Provident Fund, Citizens Investment Fund, Social Security Fund, HIDCL, insurance companies and subsidiaries of the authority. The 49 percent of the ordinary shareholders will be foreign-employed and non-resident Nepalis, employees of the founding shareholder organizations, project-affected individuals and the general public.
An investment of Rs 168 billion will be made through co-financing by banks and financial institutions for the construction of the project. An understanding has been reached between the authority, the project promoter company, and banks and financial institutions for an investment of about Rs 53 billion through co-financing in the project. The investment modality of the project has been approved by the company's board, said Ramchandra Poudel, Chief Executive Officer of Upper Arun Hydro Electric Limited. 'The investment modality has been approved by the company's board and has reached the board of the Nepal Electricity Authority,' said Poudel. 'The board of the authority has also approved it. Now it will be sent to the Ministry of Energy.' The company has stated that the investment modality should be approved by the Council of Ministers from the Ministry of Energy to the Ministry of Finance.
After the World Bank's investment is in doubt, the government is going to take Upper Arun forward with the investment of banks and financial institutions within the country and Nepalis living at home and abroad. Ramchandra Poudel, Chief Executive Officer of Upper Arun Hydro Electric Limited, said that the World Bank has not made any decision on whether to formally invest or not. "The World Bank has not formally sent any notice of withdrawal. There is no information that the World Bank board has made any decision to invest," Poudel said. After the World Bank has not made any decision for two years, the Ministry of Energy has moved forward with the process of constructing the project with domestic investment as an alternative, Poudel said.
An agreement in principle was reached between the World Bank and the Government of Nepal in April 2002 for the construction of the Upper Arun Hydropower Project. The Ministry of Finance had stated that there was an agreement in principle on the financial management of the Upper Arun Semi-Reservoir Hydropower Project. At that time, the Ministry of Finance had stated that the agreement would be formalized after the Government of Nepal gave its approval in principle and an agreement on financial management would be signed.
The World Bank, under its leadership, had taken forward the project with the participation of the Asian Development Bank (ADB), the Japan International Cooperation Agency (JICA), and others, placing high priority on raising an investment of about 2 billion (1900 million) US dollars.
The project will generate 4.53 billion units of electricity annually. The pre-construction work of the project is currently underway. The project, which is geographically remote and complex, is under construction of a 21-kilometer access road from the power house to the dam site.
An access road is under construction from the proposed power house in Chhongrang near Golabazar, Bhotkhola Rural Municipality-4 to the dam construction site near Chepuwa village, ward no. 2 of the same rural municipality in the upper coastal area. The Koshi Highway has reached Chhongrang. The project is constructing a 70-meter-long steel arch bridge over the Arun River to bypass the Koshi Highway and head towards the project site.
The company says it has spent Rs 6 billion on the project, including land acquisition. 'A total of Rs 6 billion has been spent on land acquisition, rehabilitation, various studies, etc.,' Poudel said. 'Upper Arun is 'ready to go'. Work on the access road and camp is underway.' Poudel also said that preparations are underway for the tender documents and other documents to start the project construction. The company also stated that the Power Purchase Agreement (PPA) for Upper Arun has reached its final stage.
