WB agrees to give $46m for Kabeli hydro project

- POST REPORT, Kathmandu
WB agrees to give $46m for Kabeli hydro project

Nov 24, 2014-

The government and the World Bank (WB) have signed a $46 million loan and grant agreement for the Kabeli Hydroelectric Project despite the uncertainty surrounding its fate after the Commission for the Investigation of Abuse of Authority (CIAA) ordered the termination of its licence.

The finance deal seeks to address the concern raised by the CIAA over the non-completion of the project’s financial closure. Of the total funding agreed, $40 million is loan and $6 million is grant. Finance Secretary Suman Prasad Sharma and WB Country Manager for Nepal Takuya Kamatak signed the pact on Monday.

While the loan component will be used for developing the 37.6 MW hydroelectric project, the grant will be used for developing the institutional capacity of the Department of Energy Development (DoED) and strengthening the capacity of  Investment Board Nepal for preparing and negotiating power development agreements (PDA) with large project investors, said the Finance Ministry.

The WB had pledged the loan for the project last May, but the signing of the agreement was delayed due to the government’s insistence that $6 million be grant.

Sharma said that the WB, which had insisted on classifying the entire assistance as loan as per its revised policy, finally gave in to the government’s request. The government will now re-lend the funds to Kabeli Energy Limited through Hydropower Infrastructure Development Company by signing a subsidiary credit agreement.

This is the first time the government has been involved in arranging capital for any private sector hydropower project, said the Finance Ministry. The project which is being developed by Butwal Power Company will be responsible for bearing the foreign exchange risk of the loan.

The hydropower project is located on the Taplejung-Panchthar border in eastern Nepal and is expected to be completed by June 2019.

International Finance Corporation (IFC), the private sector arm of the WB, is also making an investment of $38.12 million as equity partner in Kabeli while Kabeli Energy Limited will pour in $22.96 million as equity investor. The total cost of the project is $102.08 million.

Meanwhile, the International Bank for Reconstruction and Development of the WB has agreed to provide a $79 million grant for the implementation of the Extended Biogas Project in Nepal. The funding agreement was also signed on Monday.

The WB, acting as an implementing agency of the Scaling Up Renewable Energy Programme (SREP) in Low Income Countries Multi Donor Trust Fund under the Strategic Climate Fund, will support the objectives of the National Rural and Renewable Energy Program (NRREP) for Extended Biogas Project. The Alternative Energy Promotion Centre will implement the project for five years until 2019.

Published: 25-11-2014 09:35

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