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The Upper Arun Hydropower Project has received a significant boost as the government has opted for a concessional loan of $6m to fund the project’s initial preparations. The Cabinet meeting on Friday, approved around Rs 800m in funding from the World Bank to support the preparatory phase of the Upper Arun Hydropower Project.

Of late, there has been some momentum about the 1,061 MW project with the Finance Ministry, in the second week of June, organizing a discussion with donor agencies to secure investments for its construction. This meeting was attended by representatives from several organizations, including the World Bank, Asian Development Bank, JICA, the German Government, OPEC Fund, European Union, European Investment Bank, Germany, and Saudi Development Fund, among others.

During the discussion, representatives from the World Bank, Asian Development Bank, JICA Fund, and Saudi Fund expressed their willingness to invest in the Upper Arun project. Meanwhile, the representative from the German government indicated their readiness to invest in the transmission line contingent upon the project’s progress.

The Nepal Electricity Authority (NEA) intends to finalize the financial closure of the project by the end of 2023. The state-owned power utility has initiated the necessary steps to secure financing for the 1,061 MW project through collaborations with the World Bank and local lenders.

NEA has commenced project development by founding Upper Arun Hydropower Limited. NEA has projected that an investment of Rs 214.86bn will be necessary for the project’s development.

Out of the entire project cost, 70 percent, which amounts to Rs 150.40bn, is being sourced through loans. The World Bank has expressed its commitment to provide Rs 97.06bn in the form of a loan for the project.

The World Bank will serve as the primary international financial institution responsible for funding the construction of the project, located in the upper reaches of the Arun River within the Bhotekhola Rural Municipality of the Sankhuwasbha district. As per Finance Ministry officials, the World Bank will also lead efforts to secure investments from other donors, including the Asian Development Bank, OPEC Fund, and European Investment Bank, among others.

NEA officials said that the World Bank has already promised to provide loans for this project. “We are working to make a financial agreement with the World Bank within this year,” said the NEA source.

The project will be structured with a 70:30 debt-to-equity ratio. According to NEA, the project will secure funding through Rs 150bn in loans, consisting of Rs 97 billion from international financiers and Rs 53bn from domestic creditors.

This is the first time the global lender is back in the hydropower project in the Arun River after the debacle of the Arun-3 project in the mid-90s. 

As per NEA, a total of Rs 53bn will be raised through collaboration with a consortium of domestic institutions, which includes Hydropower Investment and Development Company Limited (HIDCL), Nepal Bank, Rastriya Banijya Bank, and Citizen Investment Trust. An initial memorandum of understanding was executed between the project's promoter company, Upper Arun Hydropower Limited, and these institutions in August of the previous year. NEA intends to finalize agreements simultaneously with both the World Bank and these domestic institutions.

The promoter company Upper Arun Hydropower Limited will invest 30 percent i.e. Rs 64.46bn in the project as equity. 

The government had advanced the concept of this project in 1985 and a feasibility study was done in 1986. The government in 2011 had entrusted the development of the project to NEA.

Currently, works are being carried out to design the tender for the construction of the project. NEA plans to start the construction of the project in 2024. It is estimated that the project will take about six years to complete, which is the picking run-of-river project. 

NEA has said that about 100 meters high will be constructed on the Arun River and the water will be channelized through an 8.5 km long tunnel to an underground hydroelectric plant in Chongrak. The project will generate 4.51bn units of electricity annually.

That electricity from the project will be connected to the substation at Haitar Sankhuwasabha by constructing a 400 kV double circuit transmission line about 6 km long from the powerhouse.

The Nepal Stock Exchange (NEPSE) gained 16.24 points to close at 1,985.43 points on Tuesday.

Similarly, the sensitive index surged by 2.43 points to close at 381. 17 points.

A total of 4,336,583-unit shares of 272 companies were traded for Rs 1. 17 billion.

Meanwhile, Shuvam Power Limited was the top gainer today, with its price surging by 10. 00 percent. Likewise, Emerging Nepal Limited was the top loser as its price fell by 8.00 percent.

At the end of the day, total market capitalization stood at Rs 2. 99 trillion.

The price of gold has increased by Rs 500 per tola in the domestic market on Tuesday.

According to the Federation of Nepal Gold and Silver Dealers’ Association, the precious yellow metal is being traded at Rs 113, 000 per tola today. It was traded at Rs 112, 500 per tola on Monday.

Meanwhile, tejabi gold is being traded at Rs 112, 450 per tola. It was traded at Rs 111, 950 per tola.

Similarly, the silver is being traded at Rs 1,405 per tola today.

As the long-anticipated Electricity Bill 2023 was introduced in the federal parliament by the government, certain aspects of the legislation have raised concerns within the private sector.

The Independent Power Producers Association, Nepal (IPPAN), has strongly objected, asserting that the government's proposed bill appears to diminish the private sector's role in advancing the country's energy sector development.

In a press conference held on Sunday, IPPAN has called for revisions to 12 specific provisions of the Electricity Bill. They are advocating for the private sector's increased involvement in the hydropower sector, akin to the provisions outlined in the Electricity Act of 1992, to be incorporated into the new electricity legislation. IPPAN is proposing that the private sector should be entrusted with the responsibility of identifying and developing hydropower projects. In contrast, the Electricity Bill 2023 currently suggests that the government will handle the survey and detailed design of these projects and subsequently invite private sector participation through competitive licensing. IPPAN argues that this provision would essentially limit the private sector's role in the construction phase of hydropower projects. 

IPPAN also has concerns regarding the proposed permit durations for privately developed hydropower projects. According to Section 19, Clause 1(a) of the Electricity Bill-2023, the permit duration has been adjusted to 50 years for reservoir hydropower projects and 45 years for other types of hydropower projects. IPPAN is advocating for the retention of provisions similar to those in the Electricity Act of 1992, where hydropower developers were granted a five-year period for survey licenses and 50-year generation licenses. 

One provision within the bill stipulates that hydropower projects initiated and managed by the government of Nepal, provinces, and local authorities, either individually or through joint investments, will receive permits without the need for competitive processes. IPPAN President Ganesh Karki has insisted on the elimination of this provision and has urged for the establishment of equitable conditions that apply to all parties involved. "It appears that the government intends to independently pursue high-quality projects while leaving only the remaining projects for the private sector's involvement," said Karki.

Independent power producers (IPPs) have asserted that the private sector demonstrates greater efficiency in constructing hydropower projects compared to government-led endeavors. They contend that hydropower projects operated by the government can be up to three times more expensive than those overseen by the private sector.

IPPAN President Karki expressed his dissatisfaction with the bill's introduction, highlighting that there was no prior formal dialogue with the private sector. This lack of consultation, in his view, diminishes the private sector's role. He has also called for amendments to the bill to incorporate the private sector's demands.

However, IPPAN has welcomed the provision within the bill that opens the door for the private sector to engage in power trading. IPPAN stated, "This will introduce competition in electricity pricing, ultimately benefiting consumers."

Once the bill receives parliamentary endorsement and presidential authentication, Nepali private sector entities, traditionally involved exclusively in electricity generation, will gain the opportunity to participate in power trading. Currently, the state-owned Nepal Electricity Authority (NEA) holds a monopoly on power trading.

This marks a significant transformation in the power sector, as it permits private enterprises to actively engage in the buying and selling of electricity. The proposed legislation seeks to establish a framework that facilitates private sector participation and fosters competition within the power trading market.

The Nepali private sector, including independent power producers, has long advocated for their inclusion in power trading. This demand arises from the fact that the Nepal Electricity Authority (NEA) currently monopolizes power purchase agreements (PPAs), leaving no other entity in the country authorized to enter into such agreements. The bill suggests that the Energy Ministry should grant licenses to registered entities with the intent of engaging in power trade.