Kathmandu: The share structure of the Upper Karnali Hydropower Project, being constructed by the Indian company Gandhi Mallikarjun Rao (GMR), is set to change.
GMR’s proposal to bring in the Indian Renewable Energy Development Agency (IREDA) as a shareholder has led to a change in the share structure after the Indian central bank did not approve IREDA’s investment, according to Pradyumna Prasad Upadhyaya, spokesperson for the Investment Board Nepal. IREDA had planned to invest 5% in the 900 MW Upper Karnali project, but the Indian Reserve Bank had not approved the process. Upadhyaya mentioned that IREDA has initiated the process for investment approval in Nepal with the Indian central bank.
While the process for IREDA’s investment approval is ongoing, GMR has informed that it will change the company’s share structure and request the board accordingly, he told Annapurna. “Without including IREDA, the new proposal will have a share structure where 36.5% will be held by GMR, 36.5% by SJVN (Sutlej), and 27% by Nepal Electricity Authority,” Upadhyaya said.
After the Indian central bank approves IREDA’s investment, the originally proposed share structure will be maintained, with Sutlej holding 34%, GMR 34%, IREDA 5%, and Nepal Electricity Authority 27%. The 60th board meeting had granted approval for Sutlej and IREDA to join as share investors in the Upper Karnali project. In August, GMR had signed agreements with SJVN and IREDA to sell equity shares. After the shareholding agreement with Sutlej and IREDA, the company had managed the financial operations for the project during the 10 years of the project development agreement. According to the latest deadline set by the Supreme Court, GMR was required to complete the financial management by January 18, 2026. The company submitted its financial management report to the Investment Board Nepal on Wednesday 15 January 2025.
Although GMR has submitted its report, including financial management, to the board, the board meeting has not yet discussed it, the board spokesperson said. He added that the upcoming board meeting, scheduled for next week, is expected to acknowledge and approve GMR’s financial management.
According to the Project Development Agreement (PDA), the construction of the project must be completed within five years of achieving financial closure. The Nepal Electricity Authority received its 27% share free of cost. GMR had submitted an application to develop the Upper Karnali project in 2006-2007. The company was awarded the responsibility to construct the project in 2008-2009. MR had bid for both the Arun III and Upper Karnali hydropower projects but chose Upper Karnali over Arun III.
According to the PDA, the agreement specifies that financial management should be completed within two years, with the remaining five years for construction, making the total project completion period seven years. However, GMR has spent several years trying to extend the deadline instead of adhering to the timeline in the PDA. The deadline for financial management of Upper Karnali was extended multiple times, in 2017, 2018, 2019, 2020, and 2021.
The electricity generated from this project, to be built in Nepal’s Achham district, will be distributed to three countries. GMR has been actively addressing all issues related to cross-border transmission lines between Nepal, India, and Bangladesh. Nepal’s Ministry of Energy has approved the power purchase agreement (PPA) between GUKHL and Bangladesh. The company will sell 500 megawatts to Bangladesh, and the finalized transmission lines have provided a capacity of 500 megawatts.
Out of the total electricity generated by the project, around 100 megawatts will be supplied to Nepal, 500 megawatts will be sold to Bangladesh under a long-term supply agreement with payment in US dollars, and the remaining 300 megawatts will be sold in India. Over a period of 25 years, Nepal is expected to earn NPR 45 billion through equity, free energy, and revenue. With only a 2.4-kilometer tunnel to be excavated and a low number of displaced households, the Upper Karnali project is considered one of the cheapest hydropower projects in the world. However, due to delays in starting the project on time, its cost has already reached approximately NPR 164 billion.
Source: Annapurna Post
