Contract Agreement Finalized for 1063-Megawatt Upper Arun Hydropower Project Consultation

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Kathmandu, Feb. 16: A supervision consultant has been selected for the 1,063 MW Upper Arun semi-reservoir hydropower project to be built in Bhotkhola Rural Municipality of Sankhuwasabha district.

The contract agreement has been signed for the consulting service– tender design, preparation of bidding document, construction supervision and post-construction services for the Upper Arun Hydroelectric Project with the Joint Venture of Tractebel Engineering GmbH, Germany (Lead firm), Tracteble Engineering S.A., France and WAPCOS Limited, India.

The Upper Arun Hydropower Project, declared as a game changer project by the government, is being implemented by the Upper Arun Hydroelectric Limited (UAHEL), a subsidiary Company of Nepal Electricity Authority.

The contract agreement was signed between the promoter of the project Upper Arun Hydro-Electric Limited and the consultant on Wednesday, according to the Nepal Electricity Authority (NEA).

The contract cost for construction supervision consulting services is 23.4 million Euros and Rs. 643 million, including VAT and the provisional sum is USD 445,000.

Arrangements have been made to pay the consultancy services in three separate currencies– Euro, Dollar and rupees.

The duration of the consultancy service is 117 months.

According to the contract agreement, the consultant will prepare the design and tender-related documents under the first phase of 21 months.

In the 72-month second phase, the construction work of the project will be supervised.

In the 24-month third phase, consulting services for project management and maintenance will be provided, according to the agreement.

During the agreement signing ceremony, NEA Managing Director and Chairman of the Board of Directors of the Upper Arun Hydroelectric Limited Kul Man Ghising said that an important step had been completed as a consultant has been appointed to supervise the construction of the game-changer project.

Stating that it is a very important task to prepare the tender documents to select the contractor for the construction of the main structure of the project within nine months, Ghising requested to complete the work in time by taking care of every second.

“We are trying to advance the project as a model project of ‘mixed investment’ involving the Nepal government, provincial government, local levels of project-affected districts and the residents, common people from all over the country, concessional loans from international multilateral development partners and loans from local banks and financial institutions,” he said.

Under the leadership of the World Bank, the process of financial management by international financial institutions will be done by June, he said.

“Pre-construction preparations are underway at the project site, and the necessary works are being done to arrange the financial arrangements and take it to the construction phase as soon as possible, ” he said.

According to the managing director of Upper Arun Hydroelectric Limited Phadindra Raj Joshi, preparations are being made to sign an investment framework agreement ranging from  USD 1 billion to USD 1.20 billion by the international financial institutions led by the World Bank at the investment conference slated for April.

At the base price of 2019, the estimated cost of the project is USD 1.75 billion (approximately Rs. 214 billion), including the interest of the construction period and inflation. Of the total cost, 70 per cent will be raised from loan and 30 per cent from equity.

In the co-financing led by the World Bank, a plan has been made to arrange the financial management by raising funds from international financial institutions and the local banks and financial institutions.

Under the leadership of Hydroelectricity Investment and Development Company (HIDCL), a memorandum of understanding has already been signed to raise about Rs. 53 billion through co-financing from the local banks and financial institutions.

Fifty-one per cent of the equity will be collected from the promoter shares of Upper Arun Hydroelectric Company, the promoter of the project, and 49 per cent from public shares.

Project-affected residents and general people across the country will have 49 per cent general shares. Pre-construction works are underway to start construction from the beginning of 2026. The construction of the project is targeted to be completed by 2031.

Among the preparations for the project, the construction of about 21 kilometers of access roads, including 2 kilometres of tunnels has started. Office buildings and residences are being constructed at the project site.

The acquisition of 232.14 hectares of private land required for the project has been completed and distribution of 90 per cent compensation has been completed, said the NEA.

The project has been designed to run at full capacity for 6 hours a day during the 6 months of winter when electricity demand is high.

According to the NEA, the project will produce 4.53 billion units of electricity annually. About 30 per cent of the total electricity generation will be produced in winter.

The generated electricity will be supplied to the national grid through the proposed substation at Haitar in Sankhuwasabha.