Kathmandu: An agreement has been concluded to mobilize Rs. 70.07 billion in investment for the 420 MW Tila-2 Hydropower Project to be constructed in Kalikot, Karnali. With Urja Tila Power Company signing an investment agreement with various banks and financial institutions led by Everest Bank, the project has completed an important stage toward financial closure for its construction.
The semi-reservoir-type project will be constructed in Kalikot district of Karnali Province. Under the project, a dam will be built in Tilagufa Municipality and the powerhouse will be constructed in Khandachakra Municipality. The total project cost is estimated at Rs. 70.07 billion.
Rs. 52.55 Billion in Debt, Rs. 17.52 Billion in Equity
Of the project’s total cost, 75 percent, or Rs. 52.55 billion, will be financed through debt, while the remaining 25 percent, or Rs. 17.52 billion, will be managed through equity.
Everest Bank is leading the consortium of banks and financial institutions investing in the project. Major commercial banks and other financial institutions are participating in the consortium. This reflects a significant investment commitment from the private and banking sectors toward a major hydropower project in Karnali.
The completion of the financial closure agreement is a more significant milestone for the project than a general investment commitment. With the required debt and equity structure clarified, the project has established the financial foundation needed for construction.
Six-Hour Peaking, 2,318 GWh of Annual Generation
Another important feature of Tila-2 is its peaking capacity. The project will be developed to operate at peaking capacity for up to six hours a day. This is expected to help provide additional electricity during periods when electricity demand is high in the system.
The project is projected to generate 2,318.79 GWh of electricity annually. Of the total generation, 451.05 GWh is estimated to be produced during peak periods in the dry season, 205.45 GWh during off-peak periods, and 1,662.29 GWh during the wet season.
This could make the project more useful to the power system compared with conventional run-of-river projects that generate significantly more electricity only during the wet season. In particular, electricity available during dry-season peak periods will be important from a system-management perspective.
Target to Complete Construction Within Four Years
The project aims to complete construction within four years of the start of construction. The project has already obtained its electricity generation license from the Department of Electricity Development, while a power purchase agreement (PPA) has also been signed with the Nepal Electricity Authority for 296.74 MW of capacity.
Thus, several key prerequisites for project development—including the generation license, PPA, and financial closure—have already progressed.
Major Expansion of Private Investment in Karnali
The investment structure of Tila-2 includes the participation of institutional and individual investors, including Stream Investment, Urja Impact Fund, and Robbins USA.
With an investment of more than Rs. 70 billion, the project is set to become one of the significant large-scale hydropower projects being developed by the private sector in Karnali. Its construction is expected to contribute not only to electricity generation but also to economic activity and employment creation during the construction phase.
A New Foundation for Karnali’s Power System
Although Karnali has significant hydropower potential, the development of large projects has remained relatively slow due to geographical challenges, inadequate infrastructure, and difficulties in mobilizing investment. In this context, the completion of Tila-2’s financial closure can be viewed as a sign that the private and banking sectors are prepared to invest in large-scale hydropower projects in Karnali.
The project’s annual generation, dry-season peak energy, and ability to operate in peaking mode for up to six hours a day mean that its importance is linked not only to its generation capacity but also to its ability to supply electricity when the system needs it most.
However, construction infrastructure, transmission facilities, and the management of geographical challenges will be critical to completing the project within the targeted four-year period. The project’s actual economic and system-level benefits will be realized only after the electricity it generates is connected to the national transmission system.
With the completion of the financial closure agreement, Tila-2 has now moved from being a project on paper toward the construction stage. Tila-2 will be an important test of the effort to transform Karnali’s vast hydropower potential into actual infrastructure for investment, generation, and transmission.
Jalasarokar