After a long homework of around decade, Nepal Water and Energy Development Company Private Ltd (NWEDC) today signed a foreign direct investment (FDI) agreement with a consortium of nine international lenders agreeing to inject $453 in debt financing for the construction of 216-MW Upper Trishuli-1 (UT-1) Hydropower Project.
Representatives from IFC, Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), Export-Import Bank of Korea (K-EXIM), Korea Development Bank (KDB), CDC Group PLC (CDC), Netherlands Development Finance Company (FMO), PROPARCO Development Financial Institution, and the OPEC Fund for International Development (OFID) signed the financial agreement of $453.2 million – approximately Rs 51.30 billion – for the loan financing of Upper Trishuli-1 Hydropower Project.
Arranged by IFC, the loan agreements were signed to provide a total amount of $453.2 million for the project. “Loans amounting to $161.3 million from IFC, $60 million from ADB, $39.6 million from AIIB, $100 million from K-EXIM, $30.8 million from KDB, $21.9 million from CDC, $15.4 million from FMO, $11 million from PROPARCO, and $13.2 million from OFID have been provided for the project,” according to a press note issued by the Investment Board Nepal (IBN).
Speaking at the agreement signing ceremony, minister for Energy, Water Resources and Irrigation Barshaman Pun said that the project is a game changer as it serves as an example of how the private companies could help Nepal expand its hydropower sector and attract the much needed FDI.
Assuring of the support, assistance, and coordination needed to expedite the process to meet the timeline set by project development agreement (PDA) for the financial closure, he claimed that the project will be an example for foreign investors.
Located in Rasuwa district, the project will generate annual energy of 1,533 gigawatt per hour (GWh) from three power generating units of total installed capacity 216 MW. “Total 38.75 per cent of the annual capacity will be generated in dry season and the remaining 61.25 per cent will be generated in wet season,” according to the press note, which reads that the delivery point of such energy generated is the under-construction Trishuli-3B Hub substation in Nuwakot. The project site is located near the Kathmandu load center and can provide a firm power of 104 MW all round the year.
During the signing ceremony, Prime Minister KP Sharma Oli – in a video message – said that it is one of the largest FDI projects of the country. “The project is important as additional 9 million people will benefit as the project comes into operation,” he said, adding that it will also prove crucial to support the government’s plan to end poverty and foster the economy. “The government urges foreigners to invest in such mega projects wholeheartedly.”
The project includes 29.5-metre high dam in Trishuli River, 9.7 kilometer-long headrace tunnel, 292- metre high vertical pressure tunnel and an underground powerhouse.
Addressing the signing ceremony, finance minister Dr Yuba Raj Khatiwada said that the project is a pilot project for bigger projects. “We are working on creating investment friendly regulations and have been very clear about the PPA policy including PPA in US dollar terms,” he said, adding that land and forest acquisitions have been made very simple to attract the investment.
Upper Trishuli-1 is the first project in South Asia to successfully complete the process of Free Prior Informed Consent (FPIC) from the local people in the project area.
The construction of the project will be done based on a fully wrapped engineering, procurement and construction (EPC) contract. A joint venture of Korean firms — Daelim Industrial Co and Kyeryong Construction Industrial Co — will carry out main construction works of the project that is scheduled to be completed is 5 years.
According to NWEDC, the construction of the project will start after the approval of the
Financing Agreements by the central bank and after the fulfillment of other conditions in the signed Financing Agreement documents. Earlier, the company had seen a funding oversubscription with nine multinational lenders offering a loan of $631 million against the $453 million required in debt finance.
“There is no question that Nepal has the potential to be an energy powerhouse,” chief executive officer of NWEDC Bo-seuk Yi, said, on the occasion. “To realise that promise, Nepal can enlist the help of private companies, which have the capital and expertise to make major projects a reality,” he added.
Likewise, director of infrastructure finance, South Asia, Central Asia, and West Asia at ADB’s Private Sector Operations Department Shantanu Chakraborty said that the agreement is a landmark transaction that will provide strong incentives for further private sector investment in Nepal’s energy sector.
To ensure it provides sustainable benefits, Chakraborty said that this project will adopt international best practices in safeguards management and will also introduce measures to promote gender equality, including job opportunities for women and better access to education, health care, amenities, and infrastructure.
On the occasion, IFC director for South Asia Mengistu Alemayehu said that the project represents a significant milestone in the development of Nepal’s hydropower potential as it has been able to attract meaningful private sector participation, particularly from international investors.
In July, the cabinet decided to extend the tax holiday to the company a few weeks after the anti-dollar alliance – Asian Infrastructure Investment Bank (AIIB) – approved its first $90 million loan to the project, raising eyebrows over the government’s decision to give tax holiday for the company, which has a dollar PPA with the power utility.
The project development agreement of the project was signed on December 29, 2016 while the power purchase agreement between NWEDC and Nepal Electricity Authority (NEA) was signed in January 2018.
When the NEA signed a power purchase agreement with Nepal Water and Energy Development Company a year ago to purchase the electricity generated by the project, the state-owned power utility agreed to pay in US dollars for a period of 10 years or until the portion of the investment made with foreign loans is recovered by the developer, whichever comes first.
After the row over hedge fund, the developer agreed to provide 17 per cent of the energy to the power utility free after 14 years and the government and electricity authority agreed to contribute two-thirds of the amount to the hedge fund.
According to the provisions, the company will be exempted from 100 per cent of income tax for the first 10 years of commercial operation and 50 per cent exemption for an additional five years.
Representatives from IFC, Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), Export-Import Bank of Korea (K-EXIM), Korea Development Bank (KDB), CDC Group PLC (CDC), Netherlands Development Finance Company (FMO), PROPARCO Development Financial Institution, and the OPEC Fund for International Development (OFID) signed the financial agreement of $453.2 million – approximately Rs 51.30 billion – for the loan financing of Upper Trishuli-1 Hydropower Project.
Arranged by IFC, the loan agreements were signed to provide a total amount of $453.2 million for the project. “Loans amounting to $161.3 million from IFC, $60 million from ADB, $39.6 million from AIIB, $100 million from K-EXIM, $30.8 million from KDB, $21.9 million from CDC, $15.4 million from FMO, $11 million from PROPARCO, and $13.2 million from OFID have been provided for the project,” according to a press note issued by the Investment Board Nepal (IBN).
Speaking at the agreement signing ceremony, minister for Energy, Water Resources and Irrigation Barshaman Pun said that the project is a game changer as it serves as an example of how the private companies could help Nepal expand its hydropower sector and attract the much needed FDI.
Assuring of the support, assistance, and coordination needed to expedite the process to meet the timeline set by project development agreement (PDA) for the financial closure, he claimed that the project will be an example for foreign investors.
Located in Rasuwa district, the project will generate annual energy of 1,533 gigawatt per hour (GWh) from three power generating units of total installed capacity 216 MW. “Total 38.75 per cent of the annual capacity will be generated in dry season and the remaining 61.25 per cent will be generated in wet season,” according to the press note, which reads that the delivery point of such energy generated is the under-construction Trishuli-3B Hub substation in Nuwakot. The project site is located near the Kathmandu load center and can provide a firm power of 104 MW all round the year.
During the signing ceremony, Prime Minister KP Sharma Oli – in a video message – said that it is one of the largest FDI projects of the country. “The project is important as additional 9 million people will benefit as the project comes into operation,” he said, adding that it will also prove crucial to support the government’s plan to end poverty and foster the economy. “The government urges foreigners to invest in such mega projects wholeheartedly.”
The project includes 29.5-metre high dam in Trishuli River, 9.7 kilometer-long headrace tunnel, 292- metre high vertical pressure tunnel and an underground powerhouse.
Addressing the signing ceremony, finance minister Dr Yuba Raj Khatiwada said that the project is a pilot project for bigger projects. “We are working on creating investment friendly regulations and have been very clear about the PPA policy including PPA in US dollar terms,” he said, adding that land and forest acquisitions have been made very simple to attract the investment.
Upper Trishuli-1 is the first project in South Asia to successfully complete the process of Free Prior Informed Consent (FPIC) from the local people in the project area.
The construction of the project will be done based on a fully wrapped engineering, procurement and construction (EPC) contract. A joint venture of Korean firms — Daelim Industrial Co and Kyeryong Construction Industrial Co — will carry out main construction works of the project that is scheduled to be completed is 5 years.
According to NWEDC, the construction of the project will start after the approval of the
Financing Agreements by the central bank and after the fulfillment of other conditions in the signed Financing Agreement documents. Earlier, the company had seen a funding oversubscription with nine multinational lenders offering a loan of $631 million against the $453 million required in debt finance.
“There is no question that Nepal has the potential to be an energy powerhouse,” chief executive officer of NWEDC Bo-seuk Yi, said, on the occasion. “To realise that promise, Nepal can enlist the help of private companies, which have the capital and expertise to make major projects a reality,” he added.
Likewise, director of infrastructure finance, South Asia, Central Asia, and West Asia at ADB’s Private Sector Operations Department Shantanu Chakraborty said that the agreement is a landmark transaction that will provide strong incentives for further private sector investment in Nepal’s energy sector.
To ensure it provides sustainable benefits, Chakraborty said that this project will adopt international best practices in safeguards management and will also introduce measures to promote gender equality, including job opportunities for women and better access to education, health care, amenities, and infrastructure.
On the occasion, IFC director for South Asia Mengistu Alemayehu said that the project represents a significant milestone in the development of Nepal’s hydropower potential as it has been able to attract meaningful private sector participation, particularly from international investors.
In July, the cabinet decided to extend the tax holiday to the company a few weeks after the anti-dollar alliance – Asian Infrastructure Investment Bank (AIIB) – approved its first $90 million loan to the project, raising eyebrows over the government’s decision to give tax holiday for the company, which has a dollar PPA with the power utility.
The project development agreement of the project was signed on December 29, 2016 while the power purchase agreement between NWEDC and Nepal Electricity Authority (NEA) was signed in January 2018.
When the NEA signed a power purchase agreement with Nepal Water and Energy Development Company a year ago to purchase the electricity generated by the project, the state-owned power utility agreed to pay in US dollars for a period of 10 years or until the portion of the investment made with foreign loans is recovered by the developer, whichever comes first.
After the row over hedge fund, the developer agreed to provide 17 per cent of the energy to the power utility free after 14 years and the government and electricity authority agreed to contribute two-thirds of the amount to the hedge fund.
According to the provisions, the company will be exempted from 100 per cent of income tax for the first 10 years of commercial operation and 50 per cent exemption for an additional five years.
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