By Dipesh Ghimire
NEA Moves Forward With Major Public Investment Plan for 1,063 MW Upper Arun Project, Targeting NRNs and Migrant Workers
In a significant step toward mobilizing domestic capital for large-scale hydropower development, the Nepal Electricity Authority (NEA) has endorsed a financial structure that proposes granting Non-Resident Nepalis (NRNs) and Nepalis working abroad access to shares worth NPR 12.95 billion in the upcoming 1,063 MW Upper Arun Semi-Reservoir Hydropower Project. The project is planned for Bhote Khola Rural Municipality in Sankhuwasabha and is regarded as one of Nepal’s highest-priority energy investments.
Massive Project Cost and Seven-Year Construction Timeline
According to NEA’s financial analysis, the project’s construction cost—excluding interest during the build period—stands at USD 1.5127 billion. Based on the current exchange rate of NPR 141 per USD, this totals approximately NPR 213.29 billion.
When interest during construction is added, the overall investment requirement rises to NPR 239.79 billion.
The project is expected to take seven years to complete, with financing modeled around an annual interest rate of 7% for its loan component. NEA has proposed a 70:30 debt-to-equity structure, where NPR 167.85 billion will come from loans and NPR 71.94 billion from equity contributions.
NEA Board Approves Financial Proposal; Government Review Next
The proposal was submitted by the project developer, Upper Arun Hydro-Electric Limited, which has already been established as a subsidiary of NEA.
A meeting chaired by Energy, Water Resources and Irrigation Minister Kulman Ghising reviewed the financing blueprint and decided to forward the proposal to the federal government for final approval.
Minister Ghising highlighted that the Upper Arun model aims to maximize the participation of NRNs, migrant workers, locals of Sankhuwasabha, project-affected communities, and general citizens across Nepal. According to him, bringing Nepalis at home and abroad into large-scale energy investments reflects the government’s push for “broad-based domestic ownership” in hydropower.
Equity Distribution Designed for Wider Public Participation
The equity structure is divided into:
51% Promoter Shares
49% Ordinary Shares
Within the 49% ordinary shares, the allocation is carefully structured to ensure representation across various groups:
18% for NRNs and Nepalis employed abroad
10% (NPR 7.19 billion) for project-affected residents and locals of Sankhuwasabha
18% (NPR 12.95 billion) for the nationwide general public
2% for disadvantaged and backward regions
1% for employees of promoter institutions
On the promoter side, NEA alone will hold 41% of total equity, amounting to an investment of NPR 29.49 billion. The rest will come from NEA subsidiaries, the Employees Provident Fund, Citizen Investment Trust, Hidcl, provincial and local governments, Nepal Telecom, Social Security Fund, insurance companies, and other institutional stakeholders.
Blended Financing Model to Reduce Risks and Lower Costs
To secure the required loan component, NEA has proposed a blended financing approach aimed at reducing long-term borrowing risks and fully utilizing domestic financial institutions.
The loan structure includes:
45% (NPR 75.53 billion) from concessional co-financing by:
Employees Provident Fund
Citizen Investment Trust
Social Security Fund
HIDCL
Nepal Telecom
Insurance and reinsurance companies
30% (NPR 50.36 billion) through Energy Bonds—to be counted within the mandatory liquidity ratio of banks and financial institutions
NPR 41.96 billion from commercial banks under a co-lending model
NEA Executive Director Manoj Silwal stated that such a structure will not only lower financing costs but also promote internal capital mobilization, ensuring that the benefits remain within Nepal’s economic system.
Projected Revenue and Expected Power Purchase Rates
Once operational, the Upper Arun project is projected to generate 4.53 billion units of electricity annually.
In its first year of commercial operation, the project is expected to earn NPR 27.90 billion, with the annual revenue increasing by 3% per year for the first eight years.
The Power Purchase Agreement (PPA) rate is estimated at:
NPR 6.30 per unit during the first year, and
an average of NPR 7.80 per unit after eight years of scheduled escalation
These revenue projections underline the financial sustainability of the project over its lifecycle.
Construction Infrastructure Progressing Quietly on the Ground
Although the main construction is yet to begin, pre-construction activities are underway.
The most crucial among these is the development of a 21-kilometer access road connecting the proposed powerhouse site near Golabazaar (Bhote Khola-4) to the dam site near Chepuwa (Ward 2).
Additionally, a 70-meter steel arch bridge is being built across the Arun River to ensure reliable access to the project location. The Koshi Highway already reaches Chongrang, providing an important logistical link for upcoming construction activities.
A National Priority Project Aiming for Swift Financial Closure
Upper Arun has been identified as one of Nepal’s strategic hydropower projects, expected to contribute significantly to the nation’s energy security and export capacity.
NEA officials indicate that completing financial closure is now the top priority, as early mobilization of funds will allow contractors to begin work within the targeted timeline.
The project’s multi-layered ownership model, coupled with investment opportunities for diverse Nepali groups, marks a shift toward inclusive hydropower financing—a strategy Nepal has increasingly embraced for its megaprojects.
