June 19, 2016 Categories DevelopmentTop News


The process for construction of the Upper Karnali Hydropower Project has moved forward. The project now looks almost certain to be developed after promoter GMR India sought letters of intent (LoI) from companies. The project was mired in dispute for a long time due to obstructions by locals. GMR Upper Karnali Hydropower Limited has sought LoIs from international companies to start work for the 900-MW project in different lots including civil, hydromechanical and electromechanical works, and construction of office and residential buildings. GMR has sought LoIs for prequalification selection giving a 15-day deadline. GMR has sought LoIs from international contractors in two lots in a way to construct the project in engineering procurement contract (EPC) model. Civil and hydromechanical works, construction of infrastructures including buildings and engineering works will be done in the first lot. Similarly, proposals for electromechanical works have been sought for the second lot. Global tender will be called for competition in cost after selecting financially and technically capable companies from among those submitting LoIs. Joint Secretary and Spokesperson at the Investment Board, Nepal (IBN) Ravi Bhattarai confirmed that GMR has sought LoIs. He claimed that all the preparations prior to construction have been completed and the project will soon move forward. He added that conducive environment for moving the project forward is being created. GMR has moved the project forward through the IBN.

Different international banks and financial institutions have expressed interest to invest up to Rs 110 billion in the Rs 139-billion project. Nine international banks and financial institutions are currently doing due diligence audit (DDA) for the project. Nine international banks and financial institutions including the International Finance Corporation (IFC) under the World Bank, Asian Development Bank (ADB), European Investment Bank (EIB), Japan International Cooperation Agency (JICA), KfW Development Bank and others have submitted LoIs to invest in the project. The Project Development Agreement (PDA) signed with the IBN requires GMR to make financial arrangements for the project by mid-September.

Still problems in land acquisition

The company is holding dialogue with different parties for acquisition of necessary land. There is some delay in land acquisition, according to the IBN, due to obstruction by a few political parties. GMR will have to complete the project by the end of 2021 and hand it over to the Nepal government in 2046. GMR Upper Karnali Hydropower Limited has already been formed in partnership with the Nepal Electricity Authority (NEA) to develop the project. The NEA has 27 percent stake in the project, IFC 10 and GMR 63. GMR is looking for strategic partner to sell its 30 percent stake in the project. GMR was awarded the project after it offered 12 percent (108MW) of free energy and 27 percent of free equity during the global bidding. The relatively cheap project is being developed to export generated electricity to India. It will affect Surkhet, Dailekh and Achham districts.

Three parties continue to obstruct

Local leaders of three political parties have been obstructing the project stating that it should not be developed with Indian investment as it is a cheap project. Local leaders and cadres of the Maoist party led by Netra Bikram Chand, Nepal Workers and Peasants Party and National People’s Front have been obstructing the project.