Nepal approves India’s GMR plan for $1.4 billion hydroelectric plant

The Nepalese government and India’s GMR have signed a project development agreement (PDA) to develop the 900 MW Upper Karnali hydroelectric power plant in the northwest of the country.

The government of Nepal agreed to allow GMR to conduct the project in 2008, but the project was delayed due to political instability with six government changes in as many years.

Under the agreement Nepal will receive 27% free equity and 12 percent free energy from the project which is expected to be operational by 2021. After 25 years of energy production, GMR will have to give its 73% stake of the project to Nepal.

The total project investment is estimated at US$1.5 billion.

Nepal has 83,000 MW of theoretical hydroelectric potential, about 42,000 MW of which is technically and economically viable. Several companies such as China’s Three Gorges International Corp and Indian Satluj Vidyut Nigam have plans to develop hydropower projects in Nepal.

The government of Nepal aims to increase the country power capacity. Nepal’s current electricity supply is unreliable, expensive, and insufficient. These supply problems can be attributed to a high transmission and distribution losses, piecemeal expansion of the national grid, high cost of power purchase agreements, among others.