Nepal Electricity Authority (NEA) is constructing 1,061 MW Upper Arun Hydroelectric Project through a ‘blended financing’ model.

According to the NEA, the semi-reservoir hydropower project will have 30 percent equity investment from the power utility, the federal government, the provincial government, local government of the affected area, local people from the district concerned and ordinary public. Similarly, the project will be constructed in 70 percent loans investment from donor agencies and Nepali bank and financial institutions (BFIs).

NEA Managing Director Kulman Ghising said the hydropower project will be the first in its type to be constructed under the blended financing. According to him, the project will be expedited as a model project to construct in a fast track mechanism.

The estimated cost of the project will be Rs 214 billion (USD 1.75 billion) that will include the banks’ interest payment and annual inflation rate. Of the amount, Rs 150 billion will be taken from the donor organizations, under consortium of the World Bank. Of the remaining amount, Rs 53 billion will be taken from the BFIs.

Hydroelectricity Investment and Development Company will be leading the consortium of financing from the domestic BFIs. The construction of Upper Arun will be started from 2024 and the project is expected to start power generation from 2030.

The project is designed to run at full capacity for 6 hours a day during the 6 months of winter when electricity demand is high. The project will produce 4.51 billion units of energy annually.

About 30 percent of this energy will be produced in winter. The generated electricity will be transmitted to the national system through the proposed substation at Haytar in Sankhuwasabha through a 6 km 400 KV transmission line.

The Authority has advanced the 30 MW Ikhuwa hydropower project to be a part of the Upper Arun. Ikhuwa is also a project included in the Janata Hydropower Program.