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The Budhigandaki Hydropower Project is gearing up to issue energy bonds worth Rs 30 billion in a bid to secure investment for the long-delayed reservoir-based project.

The 1,200 MW project has an estimated base cost of $2.77 billion (around Rs 375 billion). In line with its financing model of 70 percent debt and 30 percent equity, preparations are underway to float the bonds, according to project officials.

Chief Executive Officer Arun Rajouria said the project plans to raise Rs 30 billion through energy bonds as part of its financing strategy. The proposed equity structure allocates 80 percent ownership to the government and 20 percent to the Nepal Electricity Authority.

The government is expected to invest Rs 97.47 billion in equity and Rs 150 billion in concessional loans, totaling Rs 248 billion. The Rs 45 billion already injected into the project will be converted into equity. With interest during construction included, the total cost is projected to reach Rs 406 billion.

The government has been collecting funds through an infrastructure tax on fuel to support the project. Rajouria said the project has sought Rs 150 billion from the government as a concessional loan at one percent interest. “We plan to raise Rs 30 billion through energy bonds and Rs 104 billion through commercial loans,” he said.

To make the project financially viable, the bonds are being structured to qualify under the mandatory liquidity ratio with government facilitation. They will be open to banks and financial institutions, as well as insurance, reinsurance companies and public funds.

The project also plans to secure Rs 104 billion in loans from banks and financial institutions, with additional resources to be mobilized through co-financing from institutions such as the Employees Provident Fund, Citizen Investment Trust, Social Security Fund, insurance and reinsurance companies, HIDCL, Nepal Telecom and commercial banks. The cost of the national pride project, first decided more than a decade ago, has already surged by nearly Rs 100 billion.

Amid delays, Speaker Dol Prasad Aryal has taken a keen interest in pushing the project forward. During a meeting on Thursday with Minister for Energy, Water Resources and Irrigation Biraj Bhakta Shrestha and CEO Rajouria, he stressed the need to move ahead within a clear timeline.

“This is a national pride project. It is not only linked to electricity generation but also to tourism, agricultural marketing and employment promotion,” Aryal said, urging authorities to avoid further delays and prioritize implementation.

Energy Minister Shrestha, for his part, assured full government support to expedite the project. “Clarify where the problems lie on the government’s side, and we will coordinate accordingly,” he said.

Although the project was initiated under the Budhigandaki Hydropower Project Development Committee (Formation) Order, 2012, with a target to complete construction by fiscal year 2026/27, it has yet to enter the construction phase due to a lack of financial closure, despite compensation being distributed to around 95 percent of affected people.

Once completed, the project is expected to generate 3.38 billion units of electricity annually - 1.41 billion units during the dry season and 1.97 billion units during the wet season. The proposed tariff stands at Rs 12.40 per unit in winter and Rs 7.10 per unit during the monsoon, with projected annual revenue of Rs 31.48 billion. The plant is expected to operate for 42 years.

A total of 8,117 households in Gorkha and Dhading districts will be affected, including 3,560 that will be fully displaced. Given its proximity to major load centers such as Kathmandu, Chitwan and Pokhara, the project is considered strategically vital for Nepal’s energy security.

The plan includes constructing a 263-meter-high curvature arch dam on the Budhigandaki River along the Gorkha-Dhading border. The reservoir will spread over 63 square kilometers upstream, with potential benefits ranging from employment generation to tourism development and fish farming.

By Dilip Paudel