Funding agreed for Nepal Trishuli-1 hydro scheme 26 Mar 2020

A syndicate of banks have agreed a funding package for the Upper Trishuli-1 hydropower project in Nepal that includes major excavations for waterways and an underground powerhouse. The group of funders, led by the International Finance Corporation (IFC), the private investment lending facillity of the World Bank Group, finalised a US$453 million loan for the 216MW project in November 2019. Project owner is the Nepal Water & Energy Development company (NWDEC), which is a special purpose venture of South Korean companies, Korea South East Power, Daelim Industrial, and Kyeryong Construction Industrial, in collaboration with IFC and local investors. Estimated total cost of the project is US$650 million, resulting in the finalised loan package covering all of the 70% debt funding required for the project.

Upper Trishuli-1 calls for major underground works

Two of the equity partners, Daelim and Kyeryong, are also working in joint venture as the engineering, procurement and construction (EPC) contractor on the build, own, operate and transfer project.

Under construction in the steep-sided valley of the Trishuli River, the hydro project calls for major underground infrastructure including:

• an almost 300m long x 6.5m diameter intake
• three parallel desander caverns, each 10m wide x 24m high x 115m long
• a 9.7km long x 6.5m diameter headrace tunnel
• a 292m deep vertical shaft
• a 40m long horizontal pressure tunnel
• a 111m long penstock
• an underground powerhouse with a main cavern of 18.7m wide x 43.9m high x 83m long
• three 28m long draft tubes and
• a 238m long x 6.5m diameter tailrace back to the river

NWDEC has a 35 year concession for the run-of-river project with the Nepal Electricity Authority signed up to take output through a 30-year power purchase agreement. An initial five-year period is allowed for construction, to commission the underground power plant by 2024. The operation and maintenance contractor is the Korean power company.

The plant will operate under a gross head of approximately 340m and has potential to generate 1,460 to 1500GWh of electricity per year. IFC said the hydro project would boost the electricity supply in Nepal by a third and the funding package for the scheme is one of the largest foreign direct investments in the country.

Funding agreement ceremony in November 2019

Joining IFC in the debt funding package is the Asian Development Bank directly and through an ADB-administered Canadian Climate Fund; the Asian Infrastructure Investment Bank; the Korea Development Bank and Exim Bank; the Commonwealth Development Corporation of the UK; the Dutch development bank (FMO); the OPEC Fund for International Development; and Proparco. IFC has held an equity stake in the developer since 2013.

The World Bank Group insurance division, MIGA, is also supporting the project, issuing a 15-year cover to the Korean companies involved in the EPC and operation and maintenance contract arrangements for breach of contract risk.

The Dutch development bank Chief Investment Officer, Linda Broekhuizen, noted in a statement that the impact of the 2015 earthquake in Nepal delayed reaching the funding agreement, adding that the project would be a role model for technical, financial and environmental innovations. The Nepal Energy Minister, Barshaman Pun, noted the significance of the project for the country.