A majority-owned Korean subsidiary company has signed a financing agreement with nine co-lenders, including IFC, to build a 216-megawatt hydropower plant that will provide power to up to 9 million people by 2024. The project, developed by Nepal Water and Energy Development Company, represents one of Nepal’s largest-ever foreign direct investments. Once completed, Upper Trishuli-1, or UT-1, will sell power to Nepal’s national public utility company under a 30-year power purchase agreement.
According to the deal, a $453 million financing package organized by IFC, while a $135 million political risk guarantee from the Multilateral Investment Guarantee Agency, MIGA, and more than $100 million in blended concessional finance from the International Development Association Private Sector Window (IDA-PSW). The IDA-PSW support lessens the costs and risks associated with the project’s long development period.
The project comes at a time of growing interest in investment opportunities in Nepal.
The country, located between economic giants China and India, is richly endowed with natural beauty, fertile land, and an abundance of water. A recent IFC and World Bank study, a Country Private Sector Diagnostic (CPSD) on Nepal, pinpointed several sectors with strong potential for enabling Nepal’s economic growth, including ICT, tourism, and agribusiness. The study found that policy reforms, investments in public goods, and private sector engagement could potentially stimulate the development of those sectors.
Barshaman Pun, Nepal’s Minister of Energy, called the UT-1 hydro project a “game-changer” for his country. “Not only will it power hundreds of thousands of homes and businesses, but it will also serve as an of example of how private companies can help Nepal expand its hydropower sector and attract much needed foreign direct investment.”