Tanahun Hydropower Project: Cabinet approves soft loans from EIB

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    KATHMANDU, FEB 16 –

    The Cabinet on Friday decided to accept soft loans worth Rs 5.95 billion from the European Investment Bank (EIB) for the development of storage-type 140MW Tanahun Hydropower Project.

    The Ministry of Finance, as per the request of the Ministry of Energy, had tabled the soft loan proposal in the Cabinet three months ago.

    Madhu Marasaini, joint secretary at the Finance Ministry, said as per the request of his ministry, a high-level negotiation team from EIB is coming to Nepal on February 20. “The three-day meeting with EIB representatives will fix the terms and conditions of the soft loan,” he said.

    EIB had earlier agreed to provide soft loans worth $50 million at one percent interest.

    The government has held negotiations with representatives from Japan International Cooperation Agency (JICA) and Asian Development Bank (ADB), which have expressed interest in extending soft loans for the project.

    During the meeting, JICA said it will sign a formal agreement with the government at the earliest. JICA and ADB have pledged soft loans worth $180 million and $150 million, respectively. The government has to pay 0.1 percent interest to JICA, while ADB will charge 1 percent. After receiving the loans from these donors, the government will lend the money to Nepal Electricity Authority (NEA) at 5 percent interest rate.

    With the government traditionally providing loans to NEA at 8 percent interest rate, the cheaper financing this time is expected to make the project cheaper.

    “The government will also inject $71 million on its own,” said an NEA source.

    Tanahun Hydropower Project will be the second biggest storage-type project after Kulekhani. As per the estimated project cost, it has to sign power purchase agreement at Rs 7 per unit with NEA. The feasibility study carried out by NEA has estimated the total cost of the project at around Rs 40 billion.

    “ADB and JICA will fix the formal loan agreement signing date after the agenda is approved by their boards,” said Mahesh Acharya, managing director of Tahanun Hydropower Develo-pment Company (THDC), adding the agreement will be first signed with JICA. Acharya said the construction will begin from March, 2014, and commercial energy generation will start from January 2020.

    The project completed the environmental impact assessment (EIA) in 2009 and its detailed project report (DPR) is at final preparation stages.

    Source : The Kathmandu Post