The Nepal Electricity Authority (NEA) has been advancing the construction of the Upper Arun project, which requires an investment of over NPR 150 billion (approx. USD 1.14 billion), but the source of funding has yet to be secured.
The semi-reservoir-based hydropower project, with a capacity of 1,063 MW, is set to be built in Bhotkhola Rural Municipality of Sankhuwasabha under the NEA’s leadership. It was expected that the World Bank would invest in the project.
However, after the World Bank withdrew, the NEA has been exploring alternative sources of investment.
The project’s estimated cost, including construction-phase interest and inflation, is USD 1.75 billion (around NPR 214 billion). Of this, 70% is planned to be raised through loans and 30% through equity.
The uncertainty arose after the World Bank demanded written consent from India for providing the loan.
Although a memorandum of understanding (MoU) has been signed under the leadership of the Hydroelectricity Investment and Development Company Limited (HIDCL) to secure NPR 53 billion through co-financing from domestic banks and financial institutions, the remaining NPR 161 billion remains uncertain.
Following indications that the World Bank might not invest, NEA’s Executive Director Kulman Ghising stated that if the World Bank declines, the Upper Arun hydropower project will be developed using the investment model of the Upper Tamakoshi project. He mentioned that the project’s future remains uncertain due to the World Bank’s hesitation.
Director Ghising further said that if the World Bank does not invest, the project will proceed with funding from domestic banks, financial institutions, and the investments of Nepalis residing both in the country and abroad. “The World Bank had prioritized mobilizing approximately USD 2 billion by involving the Asian Development Bank (ADB), Japan International Cooperation Agency (JICA), and others under its leadership,” Ghising said. “However, the financial arrangement couldn’t be finalized at the last stage.”
With the World Bank showing reluctance to assist, the NEA plans to move forward with a “blended financing” model, involving investment from the Government of Nepal, provincial governments, local governments of the affected districts, residents of the affected areas, the general public nationwide, concessional loans from international multilateral development partners, and loans from domestic banks and financial institutions.
Although the primary source of investment remains uncertain, the NEA has continued its work. Construction of a 21-kilometer access road from the powerhouse to the dam site in the geographically remote and challenging project area is underway. Of this, a 2-kilometer section will require tunnel construction.
