NEA Proposes NPR 12.95 Billion Share Offering to NRNs and Migrant Workers for 1,063 MW Upper Arun Semi-Reservoir Hydropower Project

The Nepal Electricity Authority (NEA) has proposed issuing shares worth NPR 12.95 billion to Non-Resident Nepalis (NRNs) and Nepali migrant workers abroad as part of the equity structure for the upcoming 1,063 MW Upper Arun Semi-Reservoir Hydropower Project, to be developed in Botkhola Rural Municipality of Sankhuwasabha district.

Total Project Cost Estimated at Rs 239.79 Billion Including Interest

A financial analysis prepared for the project estimates the construction cost (excluding interest) at USD 1.5127 billion, which converts to NPR 213.29 billion at the current rate of NPR 141 per USD.
Including interest during construction, the total project cost is expected to reach NPR 239.79 billion.

Out of this, 30% (NPR 71.94 billion) will be raised through equity and 70% (NPR 167.85 billion) through loans.
The construction period is estimated at seven years, with an expected annual interest rate of 7% during that period.

Financial Structure Approved by NEA Board

Upper Arun Hydro-Electric Limited—the project’s promoter—had submitted the financial management proposal to NEA.
A meeting of the NEA Board chaired by Energy Minister Kulman Ghising approved the proposal and decided to forward it to the government for further approval.

Minister Ghising stated that the project is structured to ensure investment opportunities for NRNs, migrant workers, affected local residents, and the general public across the country, with a focus on mobilizing domestic capital. He emphasized the need to complete financial closure at the earliest to begin construction.

Equity Division: 51% Promoter Shares, 49% Ordinary Shares

The project’s equity structure allocates:

• 51% Promoter Shares

• 49% Ordinary Shares

From the total equity:

• NPR 36.69 billion will be invested by promoters

• NPR 35.25 billion will be raised through public share issuance

The 49% ordinary shares are further categorized as follows:

• 18% for NRNs and Nepalis working abroad

• 10% (NPR 7.19 billion) for project-affected areas and residents of Sankhuwasabha

• 18% (NPR 12.95 billion) for the general public nationwide

• 2% (NPR 1.44 billion) for disadvantaged regions

• 1% (NPR 0.71 billion) for employees of promoter institutions

Breakdown of Promoter Shareholding

NEA will hold 41% promoter equity, totaling NPR 29.49 billion.
Other promoter investments include:

• 2% + 2% from NEA subsidiaries, Employees Provident Fund, and insurance/reinsurance companies

• 1% (NPR 71.93 million) from Citizen Investment Trust, HIDCL, provincial and local governments

• 0.5% (NPR 35.97 million) from Nepal Telecom and Social Security Fund

Loan Mobilization Through Multiple Instruments

To meet the project’s huge financing requirement, NEA has proposed a mixed-funding model focusing on domestic resources.

Key components include:

1. 45% (NPR 75.53 billion) as concessional co-financing from:

   • Employees Provident Fund

   • Citizen Investment Trust

   • Social Security Fund

   • HIDCL

   • Nepal Telecom

   • Insurance and reinsurance companies

2. 30% (NPR 50.36 billion) through issuance of Energy Bonds

3. Remaining NPR 41.96 billion through co-financing from banks and financial institutions

NEA Executive Director Manoj Silwal said the blended financing model will reduce borrowing risks, lower costs, and maximize the use of domestic capital sources.

Revenue Projection After Commercial Operation

Once the project starts commercial generation:

• Annual energy production will be 4.53 billion units

• First-year revenue is projected at NPR 27.90 billion

• Revenue is expected to rise by 3% annually for the first eight years

• Average PPA rate will be:

  • NPR 6.30 per unit in the first year

  • NPR 7.80 per unit on average after eight years of annual escalation

Pre-construction works are currently ongoing.
A 21-kilometer access road from the proposed powerhouse at Golabazaar (Botkhola-4) to the dam site near Chepuwa (Ward 2) is under construction.
The Koshi Highway already reaches Chongrang, and a 70-meter steel arch bridge is being built across the Arun River to connect the project site.

The Upper Arun project is considered a national-priority megaproject. NEA has stated that once financial closure is completed, construction will be accelerated to meet the seven-year completion target.