Under the leadership of the Nepal Electricity Authority (NEA), the 1,063 MW Upper Arun Semi-Reservoir Hydropower Project, to be developed in Bhotkhola Rural Municipality of Sankhuwasabha, has proposed issuing Rs. 12.95 billion worth of shares to Non-Resident Nepalis (NRNs) and Nepalis working abroad.

The financial analysis and structure estimate the project cost (excluding interest during construction) at USD 1.5127 billion. Converting this amount at the prevailing exchange rate of Rs. 141 per USD, the total cost (excluding interest) reaches Rs. 213.29 billion.

Including the interest during the construction period, the project cost totals Rs. 239.79 billion. Of this, 30% (Rs. 71.94 billion) will be equity investment, while 70% (Rs. 167.85 billion) will be managed through financial arrangements. The project is expected to take seven years to complete, with an estimated annual interest rate of 7% during the construction phase.

The financial management proposal, prepared by the project promoter Upper Arun Hydro Electric Limited, was approved by its board and submitted to NEA. A meeting of the NEA Board of Directors chaired by Minister for Energy, Water Resources and Irrigation Kulman Ghising endorsed the proposal and decided to forward it to the government for further approval.

Minister Ghising stated that the project is being managed through domestic investment, enabling NRNs, migrant workers, project-affected locals, and citizens across the country to participate. He emphasized that efforts are underway to finalize financial management as soon as possible and move the project into the construction phase.

Equity Allocation Plan

The project proposes raising funds through 51% promoter shares and 49% general shares:

• Promoter Equity: Rs. 36.69 billion
• General Public Equity: Rs. 35.25 billion

Among the 49% public shares, the allocations are:

• 18% (Rs. 12.95 billion) – NRNs and Nepalis working abroad
• 10% (Rs. 7.19 billion) – Project-affected areas and residents of Sankhuwasabha
• 18% (Rs. 12.95 billion) – General public across Nepal
• 2% (Rs. 1.44 billion) – Backward communities
• 1% (Rs. 71.94 million) – Employees of promoter institutions

Promoter Share Distribution

NEA will hold 41% promoter shares amounting to Rs. 29.49 billion.
Additional promoter investments include:

• 2% (Rs. 1.44 billion) – NEA subsidiaries, Employees Provident Fund, insurance & reinsurance companies
• 1% (Rs. 71.93 million) – Citizen Investment Trust, HIDCL, provincial & local governments
• 0.5% (Rs. 35.97 million) – Nepal Telecom and Social Security Fund

Loan Arrangement

The project requires Rs. 167.85 billion in loans. No government loans will be used, and the project will rely on internal financial sources.

The proposed financing structure includes:

• 45% concessional co-financing: Rs. 75.53 billion
  (from EPF, CIT, Social Security Fund, HIDCL, Nepal Telecom, insurance companies)
• 30% through Energy Bonds: Rs. 50.36 billion
• 25% through bank and financial institution co-financing: Rs. 41.96 billion

Executive Director Manoj Silwal said the mixed financing structure helps reduce costs, minimize investment risks, and maximize the use of internal capital sources.

Revenue Projections

• Annual revenue in the first year of commercial operation: Rs. 27.90 billion
• With 3% annual escalation for 8 years, revenue is projected to reach Rs. 34.59 billion during the project period.
• Estimated PPA rate in the initial year: Rs. 6.03 per unit
• After 3% yearly escalation for 8 years: Average Rs. 7.80 per unit

Construction and Infrastructure Progress

The project is expected to generate 4.53 billion units of electricity annually.

Pre-construction work is underway, including:

• 21 km access road from the proposed powerhouse at Chonreng (Ward 4, Bhotkhola) to the dam site near Chepuwa (Ward 2)
• Koshi Highway already reaches Chonreng
• A 70-meter steel arch bridge over the Arun River is under construction to connect the project area

Upper Arun Hydro Electric Limited, a subsidiary of NEA, has already been established to carry out construction. The project is listed under the People’s Hydropower Program, ensuring broad public participation through equity allocation.