Govt to sign loan pact with ADB, JICA next year

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    KATHMANDU, DEC 08 –

    The government will sign a loan agreement with the Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA) early next year for the development of Tanahun Hydropower Project (140 MW).

    ADB will provide $38 million in grant and $123 million soft loans, while JICA will give $180 million in soft loans.

    The Nepal Electricity Authority (NEA), which will develop the project, said although the European Investment Bank (EIB) has also pledged $50 million as in soft loans, but an agreement with EIB will take some time.

    Mahesh Acharya, the project chief, said communications with the two donors ‘are underway to seal a deal by January’. “During the talks, both the donors have assured to sign the deal in January,” he said. “The date for the signing of agreement, however, has yet to be fixed.”

    He said separate agreements would be signed with the donors, with ADB signing first.

    The donors had agreed to sign the loan deal after two separate fact-finding missions from ADB and JICA approved the assistance for the project. The missions had inspected the project site and evaluated project-related documents in August.

    The government has to pay 0.1 percent interest to JICA, while ADB and EIB will charge 1 percent interest each. 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 to NEA,” said an NEA source.

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

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

    The project has already announced a tender for a construction contractor. Acharya said the construction work will begin in March 2014 and commercial energy generation will start from January 2020.

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

    Source : The Kathmandu Post