Potential financers to meet IBN, GMR today
- Upper Karnali hydropower project
The prospective lenders have submitted an expression of interest, pledging a loan of more than $1 billion to the project, according to multiple sources
Apr 5, 2016-As the deadline for financial closure nears, prospective financers of the Upper Karnali Hydropower Project have converged in Kathmandu for a lender conference.
A team of representatives from Asian Development Bank (ADB), International Finance Corporation (IFC), International Bank for Reconstruction and Development (IBRD), Commonwealth Development Corporation (CDC), DEG a subsidiary of German Development Bank, Japan International Cooperation Agency (JICA) and OPEC Fund for International Development (OFID) arrived in Nepal on Monday to take stock of the 900MW project.
The team will hold tri-party meeting with Investment Board Nepal (IBN) and the project’s developer GMR India on Tuesday.
According to a government source, IBN and GMR India will give a series of presentations to the visiting team.
“As GMR has to complete the financial closure of the project by September 2016, the team’s visit is important,” the source said.
The team will review the project’s progress, including details of the power purchase agreement, existing financial arrangement and progress towards financial closure before making a final commitment for loan.
Multiple sources have confirmed the potential lenders have submitted an expression of interest (EOI), pledging a loan of more than $1 billion to the project. “After completing the visit, the team will take the lending proposal to the boards of their respective organisations for approval,” said the sources. “It will take around nine to 12 months for the lenders to come up with a financing decision.”
The project is targeted to be completed by 2021 at an estimated cost of Rs145 billion.
ADB Country Director for Nepal Kenichi Yokoyama confirmed a team from its private sector operation department has arrived in Kathmandu for the assessment of the “interest in financing”.
ADB has the policy of investing a maximum of 25 percent of the required financing for a private sector-developed project.
The developer should complete land acquisition before the financial closure. According to IBN, an agreement has been reached on the resettlement action plan with locals to be displaced by the project. “The land acquisition progress is almost over,” said an IBN official.
In December 2014, IFC had signed an agreement with India’s GMR Group to become an equity partner in the project. As per the agreement, IFC will have a 10 percent stake and will lead the fundraising for the financial closure.
Subsequently, the government and GMR signed a Project Development Agreement (PDA) in September 2015. The project is spread over three districts-Surkhet, Dailekh and Achham.
The project developer will give 27 percent of the shares to the government, while the country will get 12 percent (108MW) of the total energy produced for free.
The project is expected to provide jobs for more than 2,000 individuals and the government is projected to earn Rs300 billion as financial benefits. The project will acquire 48.85 hectares of private land and 207.75 hectares of government-owned land. It will affect an estimated 239 households.
Published: 05-04-2016 08:31