The Nepal Electricity Authority has proposed issuing shares worth Rs 12.95 billion to non-resident Nepalis (NRNs) and Nepali workers abroad for investment in the 1,063-MW Upper Arun Hydropower Project, which is proposed to be built in Bhotkhola Rural Municipality of Sankhuwasabha district at the initiative of the state-owned power utility.
The project’s estimated cost, excluding interest during construction, stands at USD 1.5127 billion. At the prevailing exchange rate of Rs 141 per US dollar, the cost translates to Rs 213.29 billion. Including interest during the construction period, the total project cost is expected to rise to Rs 239.79 billion.
Of the total cost, equity will account for 30 percent, or Rs 71.94 billion, while loans will cover the remaining 70 percent, or Rs 167.85 billion. The project’s construction period is estimated at seven years, with an assumed annual interest rate of 7 percent.
The project promoter, Upper Arun Hydro-Electric Limited, submitted the financial management proposal to the authority after endorsing it internally. A meeting of the NEA board, chaired by Energy, Water Resources and Irrigation Minister Kulman Ghising on Thursday, approved the proposal and decided to forward it to the government for final approval.
Minister Ghising said the authority aims to manage the project’s financing through domestic investment by enabling participation from NRNs, Nepalis working abroad, project-affected communities and the general public across the country. He added that the authority is working to complete financial closure as quickly as possible and begin construction.
Under the proposed equity structure, 51 percent will remain as promoter shares while 49 percent will be issued to the public. Promoters will contribute Rs 36.69 billion, while public shareholders will invest Rs 35.25 billion.
Of the 49 percent public share issue, 18 percent has been set aside for NRNs and migrant workers. Another 10 percent, worth Rs 7.19 billion, will go to project-affected people and residents of Sankhuwasabha district. The general public nationwide will receive shares worth Rs 12.95 billion (18 percent), people from backward regions will receive Rs 1.44 billion (2 percent), and employees of the promoter institution will receive Rs 71.94 million.
Within the promoter group, the NEA will hold a 41 percent stake amounting to Rs 29.49 billion. Its subsidiary companies, the Employees Provident Fund, insurance and reinsurance companies will each hold 2 percent shares worth Rs 1.44 billion. The Citizens Investment Trust, HIDCL, and provincial and local governments will each hold 1 percent stake worth Rs 719.3 million. Nepal Telecom and the Social Security Fund will each hold a 0.5 percent stake worth Rs 359.7 million.
The authority has already established Upper Arun Hydro-Electric Limited as its subsidiary to implement the project. The NEA has so far financed all pre-construction works. The project is also listed under the “People’s Hydropower Programme,” which maintains the 51:49 promoter–public equity structure.
The project will require loans of Rs 167.85 billion. The financial plan proposes raising all loans from domestic sources without government loan investment.
NEA Executive Director Manoj Silwal said the authority has proposed a mixed investment model to ease financial management, reduce costs, minimize investment risks and maximize the use of domestic capital from multiple sectors.
Under the loan structure, 45 percent of total debt will come through concessional co-financing from institutions such as the Employees Provident Fund, Citizens Investment Trust, Social Security Fund, HIDCL, Nepal Telecom, and insurance and reinsurance companies, amounting to Rs 75.53 billion.
To mobilize a further 30 percent of the required loan—about Rs 50.36 billion—the authority plans to issue energy bonds, which banks and financial institutions can count toward their mandatory liquidity ratio. The remaining Rs 41.96 billion will be raised through co-financing by banks and financial institutions.
The authority has projected revenue of Rs 27.90 billion in the first year of commercial operation. After annual tariff escalation of 3 percent for eight years, the project’s annual revenue over its operating period is estimated at Rs 34.59 billion. The average power purchase agreement (PPA) rate is projected at Rs 6.3 per unit in the first year of commercial generation, rising to an average of Rs 7.8 per unit after eight years.
The project will generate about 4.53 billion units of electricity annually.
Pre-construction works are currently underway. Given the project’s rugged and complex terrain, a 21-km access road from the powerhouse to the dam site is under construction. The proposed powerhouse is at Chongrang near Golabazar in Bhotkhola Rural Municipality–4, while the dam site lies near Chepuwa village in Ward No. 2 of the same municipality. The Koshi Highway has already reached Chongrang. A 70-metre-long steel arch bridge over the Arun River is also under construction to connect the highway to the project site.
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