Nepal’s Upper Arun Hydroelectric Project has faced significant delays, prompting the government to request the World Bank (WB) to take a more active role in managing its financial aspects. The project, expected to generate 1,063.36 MW of electricity, was originally slated to begin construction in April 2024. However, this timeline has not been met, leading Energy Minister Deepak Khadka to meet with WB representatives on November 12, 2024, to expedite the project’s financial closure.
The government is seeking the WB’s involvement to resolve financial and logistical challenges, including potential political and diplomatic pressures from Indian company Sutlej Jalvidyut Nigam, which has shown interest in securing the contract for the project. Sutlej has been lobbying to manage not only the Upper Arun project but also other projects in the Arun basin, such as the 900 MW Arun III project, as well as the region’s transmission infrastructure.
Despite these pressures, the WB has expressed willingness to assist in finalizing the financial arrangements, but only if the Nepalese government ensures that potential challenges during construction will be addressed. A statement from the WB in late October indicated that no loan agreement had yet been finalized, and the project remains under review.
The Upper Arun Hydroelectric Project is crucial for Nepal’s energy future, as it would provide around 4.53 billion kilowatt-hours of electricity annually, especially during the winter months when demand peaks. The project is estimated to cost around $2.24 billion, and the government plans to start construction by 2026. In the meantime, Nepal Electricity Authority (NEA), through its subsidiary Upper Arun Hydro-Electric Limited, has initiated preliminary studies to prepare for the project’s construction.
