ADB, JICA, EIB pledge $391m for 140MW Tanahun hydel project

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    With three major donor agencies pledging assistance for the 140MW Tanahun Hydropower Project, the project development is expected to take off soon.

    Asian Development Bank (ADB), Japan International Cooperation Agency (JICA) and European Investment Bank (EIB) have pledged a collective $391 million in grants and soft loans for the project, formerly known as Upper Seti Hydropower Project (USHP).

    ADB would provide $38 million in grant and $123 million soft loans, while JICA and EIB have promised $180 million and $50 million, respectively, in soft loans, according to a source at the Nepal Electricity Authority (NEA), which will develop the project.

    Kailash Raj Pokharel, under secretary at the Finance Ministry, confirmed the development and said the donors have shown readiness to provide the funds. “A deal will be signed very soon. The amount under soft loans can rise,” he said.

    The government has to pay 0.1 percent interest to JICA, while ADB and EIB will charge 1 percent. The government will lend the money to NEA at 5 percent. “In a bid to make the energy generated from the project cheaper, the government is charging less interest from NEA,” said the source.

    Previously, the government used to charge as high as 8 percent interest to NEA while relending soft loans from donors, citing exchange rate risk.

    Besides the donor assistance, the government will inject Rs 2 billion and the consultant for the project will put in $48 million in the project, the NEA source said. A feasibility study carried out by NEA has estimated the total cost of the project at around Rs 40 billion.

    An official at Ministry of Energy said separate fact-finding missions from ADB and JICA will inspect the project site and then sign memoranda of understanding (MoU) with the government. “The mission from JICA is coming on Monday, while ADB mission will come shortly after,” said the official. “As ADB has already allotted $151 million, we will sign the deal with ADB in December. The MoU with JICA and EIB will be signed later.”

    As per the requests of ADB and JICA, the government is allowing the consultant to invest in the project. The consultant will also have the responsibility of construction and operation of the project.

    NEA will hold 74 percent stake in the project, while the consultant will have 26 percent share.  Ministry officials said 10 years after the project’s operation, NEA will buy out the consultant’s share. The project has also announced a tender for a construction contractor. Mahesh Acharya, project chief, said construction work will begin from March, 2014, and commercial energy generation will start from January 2020.

    THP will be the second biggest storage-type project after Kulekhani. As per the current construction cost of the project, it will have to sign power purchase agreement (PPA) at Rs 7 per unit with NEA.

    He added that the company recently applied for the construction license to the Energy Ministry and has been preparing a draft PPA.

    Source : Ekantipur