The Energy Ministry on Thursday signed the first ever project development agreement (PDA) with a private company—Nepal Water and Energy Development Company (NWEDC)—for the construction of the Upper Trishuli-1 Hydroelectric Project.

The 216 MW scheme is located at Dhunche in Rasuwa district. Dinesh Kumar Ghimire, joint secretary of the ministry, and Bo Seuk Yi, CEO of NWEDC, signed the pact on the behalf of their respective organizations. 

“I am buoyed by the recent development,” said Seuk Yi. “This marks our entry into the Nepali hydropower industry, which we would like to continue with other projects in the future.”

The PDA has given NWEDC six months to complete the power purchase agreement (PPA) with the sole buyer Nepal Electricity Authority (NEA), two years to complete the project’s financial closure and five years to complete the construction and start generation. 

Once the construction is completed, the developer will operate the project for 35 years and hand it to the government in working condition.

“We are planning to have the ground breaking ceremony by next year,” said Seuk Yi. “Before that, we will conclude the PPA with the NEA and complete the financial closure for the project’s development.” The company plans to start generating electricity by 2022. 

“After the completion of this project, we will develop other projects as we want to be a long-term player in the Nepali market,” he said. 

According to a highly placed source at the ministry, the PDA allows the NEA to sign the PPA in convertible currency terms for the amount of foreign debt for 10 years. “Also, the government will guarantee payment to the developer if the NEA defaults during the concessional period of 30 years,” said the source. 

In case of the government’s failure to provide any kind of payment to the developer, the International Development Association (IDA) of the World Bank (WB) Group will guarantee payment, according to the PDA.

“In that case, the IDA will later claim the amount from the government,” said the source. “The government and the WB will later finalise the amount to be covered under such a guarantee.”

NWEDC is a joint-venture company in which three Korean companies, the International Finance Corporation (IFC) and Nepali investor Bikesh Pradhanang have stakes. 

The Korean companies are Korea South East Power Company, Daelim Industrial Corporation and Kyeryong Construction Industrial Corporation.

The run-of-the-river project will generate 216 MW of energy through three turbines of 72 MW capacity each. The project is expected to generate 1,456.4 gigawatt hours of net electricity per year, of which 1,149.7 gigawatt hours will be generated in the wet season and 306.7 gigawatt hours in the dry season.