New Hydro Power Plant for Nepal

The long-awaited Upper Karnali Hydro Power project was recently approved by the Investment Board of Nepal and the cabinet of the Government of Nepal, giving the go-ahead to the Bangalore-based GMR Group which was awarded the contract in 2008. The project, which was awarded through an international bidding process and is worth up to $1.5 billion, is reportedly the largest foreign direct investment for Nepal, as well as being the largest investment by the GMR Group beyond India’s borders.

The project was reportedly awarded on a build-own-operate-transfer (BOOT) basis, with Nepal receiving 27 percent free equity share and 12 percent of the electricity produced at no charge, while GMR operates the power plant for 25 years, exporting power produced to India or selling it to Nepal. At the end of the agreed 25 years, 100 percent ownership of the project will go to the government of Nepal. This type of contact is used in a number of countries, allowing private companies to recover the costs of their investment, while easing the financial burden on countries for developing infrastructure.

Located on the Karnali River in Nepal’s Surkhet, Dailekh and Achham districts, the Upper Karnali Hydro Power project is expected to be completed by 2021. In addition to providing power to Nepal, where in rural areas many still rely on burning wood for cooking, the Karnali project, as well as other hydro projects in the pipeline, will boost the economy by exporting power. Currently, Nepal is very limited in exports, with much of its foreign income coming from Nepali citizens working outside the country and sending money home.

Other hydro power projects in Nepal include the Khopasi Hydro Power Station, the Chilime Hydropower Plant and the Kaligandaki A Hydroelectric Power Station. Owned and operated by the Nepal Electricity Authority, the Kaligandaki A Hydroelectric Power Station is located around 300 km west of Kathmandu, in the Syangja District. Currently it is the largest power plant in Nepal and is able to generate 144 MWs of electricity. The new power plant will have a capacity of 900 MW.