With six months left for financial closure of the Upper Karnali Hydropower Project, a team of representatives from Asian Development Bank (ADB), International Finance Corporation (IFC) and European Investment Bank (EIB) is visiting Nepal to take stock of the 900 MW project.
The team will review the progress of the project, details of power purchase agreement, existing financial arrangement and progress towards financial closure before making a final recommendation for granting loan. “They will be in Nepal in the first week of April,” said an informed source.
Government sources said that the ADB, IFC and EIB have agreed in principle to grant a loan amounting to $1 billion for financing the project promoted by India’s GMR.
“As GMR has to complete the financial closure of the project by September 2016, the visit is important for the project,” the source added.
The project is targeted to be completed by 2021 at an estimated cost of Rs145 billion.
ADB Country Director for Nepal Kenichi Yokoyama confirmed that a team from ADB is coming. “ADB has shown keen interest in financing the project but nothing has been decided,” he said.
According to him, the ADB has the policy of investing maximum 25 percent of the required financing for a private sector developed project.
With the financial closure approaching, there has been some progress in the project. The developer should complete the land acquisition before the financial closure. According to the Investement Board Nepal (IBN), an agreement has been reached on the resettlement action plan with locals who are being displaced by the hydro project. “Land acquisition progress is almost over,” said an IBN official.
In December 2014, the IFC had signed an agreement with India’s GMR Group to become an equity partner in the project. As per the agreement, the IFC will have a 10 percent stake and lead the fund raising for the financial closure.
Subsequently, the government and GMR signed a project development agreement (PDA) in September 2015 for the construction of the project. It is spread over three districts-Surkhet, Dailekh and Achham.
The project developer will give 27 percent of the shares to the government and the country will also receive 12 percent (108 MW) of the total energy produced for free. Similarly, the project is expected to provide jobs for more than 2,000 people and the government is projected to earn Rs 300 billion in financial benefits. The project will be acquiring 48.85 hectares of private land and 207.75 hectares of government-owned land. It will affect an estimated 239 households.
Source : The Kathmandu Post