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After the Office of the Prime Minister and Council of Ministers formally authenticated the approved “investment modality” for the reservoir-based Budhigandaki Hydropower Project, further construction-related activities have moved forward.

According to a news published in Gorkhapatra Daily, the Cabinet meeting had approved the investment modality on Falgun 12 (Nepali calendar), although formal notification was provided to the Ministry of Energy only last week.

According to Arun Rajouria, Chief Executive Officer of the Budhigandaki Hydropower Company, preparations are already underway with a plan to begin major construction of the 1,200 MW national pride project from Poush 2084.

The paper said that land acquisition for the project, located on the border of Gorkha and Dhading districts, is almost complete. Despite decades of uncertainty surrounding the project, most of the land in the affected area has now been acquired. Former Minister for Energy, Water Resources and Irrigation Kulman Ghising had shown active involvement in finalizing the investment modality after the formation of the government following the Jana Andolan.

Accordingly, the ministry finalized the modality on Mangsir 9, which was later presented to the Cabinet after approval from the Ministry of Finance and Ministry of Law.

CEO Rajouria stated that the plan is to obtain the project’s survey license by Asar. For this, a total of NPR 1.2 billion must be paid to the Department of Electricity Development. Of this, NPR 200 million has already been paid during the application process, while the remaining NPR 1 billion is proposed to be counted as government equity in the company.

The company is preparing to invite bids within the current fiscal year for Lot 1 works, which include building a permanent camp, access road, and a bridge. The government has allocated NPR 460 million for the project in the current fiscal year (2082/83), which will be used to initiate these works.

For the main construction, an international competitive bidding process will be required. Before that, an international tender will be issued to select a consulting firm, which will guide the main contractor once appointed.

Alongside this, the company will also need to arrange financing in accordance with the approved investment modality. As per the modality, 30% of the investment will be equity and 70% will be loans. The base cost of the project is estimated at NPR 374 billion, with a target completion timeline of eight years. During this period, approximately NPR 32 billion in interest is expected, bringing the total project cost to around NPR 406 billion.

Out of the total, NPR 121 billion will come from equity investment. Of this, 50% will be from the Ministry of Energy, Water Resources and Irrigation and 30% from the Ministry of Finance, making the government’s direct equity investment NPR 97.47 billion.

The remaining 20% equity will be held by the Nepal Electricity Authority. According to the modality, 20% of the government’s direct equity share will be issued to project-affected locals and the general public at the time of project completion. “The idea is to protect public interest by not taking public investment before construction and allowing people to invest only when the project is near completion,” Rajouria said. “This ensures people can make informed investment decisions. The shares of the Ministry of Finance and Energy may be reduced, but there will be no change in the Nepal Electricity Authority’s stake.”

On the debt side, the government will provide loans at a 1% interest rate using funds collected from a petroleum infrastructure tax on diesel and petrol, which generates around NPR 20 billion annually. This will amount to NPR 150 billion. Additionally, the company will issue green bonds worth NPR 30 billion.

The remaining NPR 104 billion will be raised through co-financing from public and private banks and financial institutions in Nepal. Discussions have already begun with potential institutional investors such as the Employees Provident Fund, Citizen Investment Trust, Nepal Telecom, as well as commercial banks and insurance companies, to mobilize loan investments through co-financing, Rajouria added.