Kathmandu. The government has proposed to issue shares worth Rs 12.95 billion to Non-Resident Nepalis (NRNs) and Nepalis in foreign employment in the 1,063-megawatt Upper Arun Semi-Reservoir Hydropower Project to be constructed at Bhotkhola rural municipality of Sankhuwasabha district.

The financial analysis and financial framework of the project is estimated to be 1.51 billion US dollars excluding interest during construction period.

The total cost of the project is Rs 213.29 billion excluding interest during the construction period, converting the current regulation rate of Rs 141 per US dollar.

The project has to spend Rs 239.79 billion including interest during construction period. Out of which the equity will be 30 percent i.e. Rs 71.94 billion. A total of 70 per cent of the total cost i.e. Rs 167.85 billion has been proposed for financial management. The project construction period is estimated to be 7 years and the interest rate is estimated to be 7 percent annually.

The project promoter, Upper Arun Hydro-electric Limited, had approved the proposal and submitted it to the Nepal Electricity Authority (NEA). A meeting of the Board of Directors of NEA held today under the chairmanship of Minister for Energy, Water Resources and Irrigation, Physical Infrastructure and Transport and Urban Development Kul Man Ghising decided to approve the proposal and submit it to the government for necessary decision.

Minister Ghising said that the financial management of Upper Arun will be made with domestic investment so that NRNs, Nepalis employed abroad, project affected people and general public across the country can invest in the project. He added that works are underway to complete the financial management at the earliest and take the project into construction.

The company has proposed to raise the amount by issuing 51 percent promoter shares and 49 percent ordinary shares of the equity to be invested in the project. The company will invest Rs 36.69 billion from the company and Rs 352.5 million from the IPO issuance.

Out of the 49 percent IPO shares, 18 percent have been allocated to NRNs and Nepalis working abroad. Similarly, Rs 7.19 billion (10 per cent) has been allocated to the project-affected areas and residents of Sankhuwasabha district, Rs 12.95 billion (18 per cent) to the general public across the country, Rs 1.44 billion (2 per cent) to the backward areas and Rs 719.4 million to the employees of the promoter agencies.

NEA will have 41 percent promoter share (Rs 29.49 billion) in the promoter company. The promoter investment of Rs 1.44 billion÷1.44 billion (2÷2 percent) belongs to NEA’s subsidiary companies, Employees Provident Fund and Insurance and Reinsurance Company, Rs 719.33 million will be invested by Citizen Investment Trust, HIDCL, Province and Local Government and Rs 359÷.97 million (0.5÷0.5 percent) will be invested by Nepal Telecom and Social Security Fund.

Upper Arun Hydro-Electric Limited, the subsidiary company of the NEA, has already been established. All the investment management done so far in the pre-construction phase of the project is being done from the NRA. The project is listed as the People’s Hydropower Program. Therefore, 51 per cent of the total equity is promoter and 49 per cent is ordinary shareholder.

A loan of Rs 167.85 billion is required to complete the project. Financial management has been proposed in such a way that the project will be financed from internal sources and the government will not invest in the project.

According to Executive Director of NEA Manoj Silwal, the project has been proposed for financial management by adopting mixed investment system in such a way that it will be easier to manage finance, reduce the investment risk, and optimally utilize the internal capital of various resources and sectors.

Of the total loan of the project, 45 percent has been proposed to be invested through concessional concessional financing. The loan can be availed from Employees Provident Fund, Citizen Investment Trust, Social Security Fund, HIDCL, Nepal Telecom, insurance and reinsurance companies. It will invest Rs 75.53 billion.

A proposal has been made to raise Rs 50.36 billion by issuing energy bonds equivalent to 30 per cent of the required loan for the project. Similarly, Rs 41.96 billion has been proposed to be raised through consortium of banks and financial institutions.

The project is expected to generate Rs 27.90 billion in the first year of commercial production. After 8 years of annual value addition of 3%, the project will have a total income of Rs 34.59 billion.

The average PPA rate is expected to be 6.3 paisa per unit in the year when commercial power generation started. After 8 years of annual price hike, the PPA rate is expected to be Rs 7.8 per unit.

The project will generate 4.53 billion units of electricity annually.

The pre-construction works of the project are currently underway. Construction is underway to access 21 kilometers from the project’s powerhouse to the dam site, which is geographically remote and complex.

An access road is underway to reach the dam construction site near Chepuwa village of ward no. 2 of the same rural municipality from the proposed powerhouse at Chhongrang near Gola Bazaar of Bhotkhola rural municipality-4. The Koshi Highway has reached up to Chongrang. A 70-metre-long steel arch bridge is being constructed over the Arun River to go to the Yajakota site from the Koshi Highway.