The two major donor financial institutes -- World Bank (WB) and Asian Development Bank (ADB) -- are jointly making investments in the Upper Arun hydroelectricity project with the capacity of 1,063-megawatts and Dudhkoshi hydropower project.
This is the first time, the two financial institutes are providing loan and grant assistances in Upper Arun, a game changer in the hydroelectricity production in Nepal, said Managing Director of Nepal Electricity Authority (NEA), Kulman Ghising.
“Almost US $4 billion is being invested in the two mega hydropower projects. World Bank will lead the construction of Uppper Arun while the construction of Dudhkoshi hydropower project will be led by Asian Development Bank according to the agreements,” said MD Ghising.
Finance Minister Barshaman Pun, during his recent visit to Washington DC, had agreed in principle with World Bank Vice President for South Asia, Martin Raiser, on the Upper Arun hydro project, according to which, WB will remain as the major investor. WB and ADB on December 6, 2023, had signed an agreement to collaborate in the hydropower investments in the Himalayan nation.
The modality of the investment has been finalized and that the projects will be taken forward by WB in collaboration with ADB. According to the agreement, WB will invest US $82.5 million while US $150 will be invested by ADB.
Besides, European Investment Bank will invest US $500 million and JICA will invest US $150 million, according to the agreement.
Similarly, the Organization of the Petroleum Exporting Countries (OPEC) will invest US $100 million, the Saudi Fund will invest US $100 million while US $400 million will be invested by various institutes of Nepal. Likewise, the Nepal government will invest US $620 million as the share capital of the NEA.
A total of US $2 billion 845 million will be raised for the investment in the project, according to the Ministry of Energy, Water Resources and Irrigation.
It will get an official recognition once the government approves it and the agreement paper on the project will be signed, said Srikrishna Nepal, an official at the Finance Ministry.
Investment Board Nepal CEO Sushil Bhatta said the agreement on this project will take place around the time of Nepal Investment Summit.
Upper Arun, a semi-hydropower project with 1,063 megawatts, will generate 4.53 billion units of electricity. The hydropower projects will be built at Bhotkhola Rural Municipality-2 and 4 and Makalu Rural Municipality 3.
ADB to lead Dushkoshi hydropower project in collaboration with WB
According to a proposal, the ADB will build the Dudhakoshi hydropower project of 635 megawatts of electricity. It is a reservoir-based hydropower project to be built in the Dushkoshi River that flows between Khotang and Okhaldhuga districts.
ADB will invest US $600 million followed by the WB with US $200 million in the Dudhkoshi Hydropower project. Similarly, European Investment Bank will invest US $300 million while AIIB, OPEC, the Saudi Fund will invest US $600 million in the hydropower project.
Likewise, public institutes of Nepal will invest US $ 50 million, NEA and the Nepal government will invest US $450 million, according to the proposal.
The project will generate 2.8 billion units of electricity during the rainy season and 1.36 billion units during the dry season.
While the world going for renewal energy to fight the climate change, WB and ADB have agreed to collaborate in the hydropower productions in Nepal. Hence, it has a significant room for growth in hydropower generation.
During the Climate Change Conference (COP 28) held in the UAE last November, the World Bank and ADB signed an agreement to cooperate in hydropower development for an initial period of 5 years.
The agreement was signed by Martin Raiser, South Asia Vice President on behalf of the World Bank and Fatima Yasmin, Regional Vice President on behalf of ADB.
Estimates suggest Nepal has the potential to generate over 40,000 megawatts (MW) of hydroelectricity.
As of 2023, Nepal's total installed hydropower generation capacity is around 2,200 MW, which is only about 5% of the potential.
