WASHINGTON, D.C., Jan. 08—The International Finance Corporation (IFC) has signed agreements to invest US$24 million in Nepal's Upper Bhote Koshi Hydroelectric Power Project, which is expected to increase the country's electricity generation by more than 10 percent. The 36 megawatt run-of-the-river project will produce electricity in accordance with the river flow and generate about 246 gigawatt-hours of electrical energy per year. It is Nepal's second hydropower project undertaken by the private sector and follows recent legislation allowing private investors to develop the country's hydropower resources.
"The project is in line with Nepal's strategy to develop its substantial hydropower capacity," said Mr. Vivek Talvadkar, Director of IFC's Power Department. "IFC played a lead role in bringing this project to financial close. In doing so, the Corporation attracted long-term financing from private commercial banks, which is the first such undertaking for a project in Nepal. It is a reflection of the financial community's confidence in Nepal's emerging economy."
An environmental assessment as well as a comprehensive public consultation process were undertaken for the project, which will be constructed and operated in compliance with national environmental laws and World Bank environmental, health and safety guidelines and policies.
The project company, Bhote Koshi Power Company Private Limited (BKPC) will build, own and operate the power plant, which is located about 110 km northeast of Kathmandu. BKPC will sell electricity to the Nepal Electricity Authority (NEA) with which it has entered into a 25-year Power Purchase Agreement. Fifty percent of the plant will be transferred to NEA after the 25-year period for a nominal fee of 1 Nepalese Rupee and the entire plant will be transferred free of charge to His Majesty's Government of Nepal at the end of the 40-year license period.
IFC's financing consists of a loan of up to US$21 million for its own account and a syndicated loan of up to US$36 million for the account of participants. This is the first syndicated loan for a project in Nepal. The participants are Dresdner Bank AG, Bayerische Vereinsbank AG and Netherlands Development Finance Company (FMO). The other co-lender to the project is DEG-German Investment and Development Company. IFC will also make an equity investment of up to US$3 million in the share capital of BKPC. Total project cost is about US$98.2 million.
Project developers are Panda Energy International, Inc. (Panda), Dallas, Texas; MCN Investment Corporation (MCNIC), Detroit, Michigan; Harza Engineering Company International L.P. (Harza), Chicago, Illinois, and Himal International Power Corporation, Ltd. (HIPC), Kathmandu, Nepal. Panda develops and operates power projects in the U.S. and various emerging markets. MCNIC is the diversified energy arm of MCN Energy Group, Inc., an energy holding company with investments in North America and Asia. Harza is a consulting engineering company specializing in hydroelectric development worldwide. HIPC is a corporation formed by Nepal's Soaltee Group to undertake the development of hydroelectric power projects.
IFC, a member of the World Bank Group, is the largest multilateral source of equity and loan financing for private sector projects in developing countries.