Govt clears plan to issue Rs 13 billion shares to NRNs, Migrant Nepalis in Upper Arun Hydro

KATHMANDU: Nepal Electricity Authority (NEA) has proposed issuing nearly Rs 12.95 billion worth of shares to Non-Resident Nepalis (NRNs) and Nepalis working abroad as part of the equity structure for the 1,063-megawatt Upper Arun Semi-Reservoir Hydropower Project in Sankhuwasabha — one of Nepal’s largest strategic energy projects aimed at boosting national power generation and long-term energy exports.

The proposal, passed by the project developer Upper Arun Hydro-Electric Limited, outlines a major plan to ensure wider domestic and diaspora participation in Nepal’s hydropower investment landscape, a sector that continues to attract global interest and growing FDI attention. Officials say the structure aligns with national goals of expanding clean energy generation, strengthening local capital mobilization, and building investor confidence.

Rs 239.79 Billion Total Project Cost

According to NEA’s financial assessment, the project is expected to cost USD 1.5127 billion (excluding interest during construction). At the current exchange rate of Rs 141 per USD, the construction cost—excluding interest—amounts to Rs 213.29 billion. Including interest during construction, the total project cost reaches Rs 239.79 billion.

Of the total, 30% (Rs 71.94 billion) will be equity, while the remaining 70% (Rs 167.85 billion) will be raised through various debt instruments. The project has an estimated construction period of seven years with an assumed annual interest rate of 7%.

The financing proposal was tabled at the NEA Board meeting chaired by Energy Minister Kulman Ghising on Thursday, where it received approval for submission to the government for further decision-making.

18% Equity Allocated for NRNs and Migrant Nepalis

The project plans to issue 49% equity as public shares, while the remaining 51% will remain with promoters.

Breakdown of the public share allocation includes:

18% (Rs 12.95 billion) for NRNs and Nepalis working abroad

10% (Rs 7.19 billion) for project-affected areas and Sankhuwasabha residents

18% (Rs 12.95 billion) for the general public across Nepal

2% (Rs 1.44 billion) for residents of underdeveloped regions

Rs 71.94 million for employees of promoter institutions

The share structure reflects the government’s “People’s Hydropower Programme,” ensuring broad public and local ownership in Nepal’s hydropower expansion.

Promoter Share Structure

NEA alone will hold 41% of the promoter shares, which equals Rs 29.49 billion in equity investment. Additional promoter investments include:

2% from NEA subsidiaries, Employees Provident Fund (EPF), and insurance/reinsurance firms

1% collectively from Citizen Investment Trust (CIT), HIDCL, provincial and local governments

0.5% each from Nepal Telecom and the Social Security Fund

Construction of Upper Arun will proceed through the already established subsidiary Upper Arun Hydro-Electric Limited, which is managing all pre-construction works.

Debt Structure: Concessional Loans, Energy Bonds, and BFIs

Of the required Rs 167.85 billion debt:

45% (Rs 75.53 billion) will come from concessional co-financing by EPF, CIT, Social Security Fund, HIDCL, Nepal Telecom, and insurance companies.

30% (Rs 50.36 billion) will be raised through energy bonds — to be counted within the mandatory liquidity ratios of banks and financial institutions.

Rs 41.96 billion will be collected through BFI co-financing.

NEA Executive Director Manoj Silwal said the mixed financing model will reduce project risks, lower overall costs, and maximize domestic capital mobilization.

Projected Revenue and Power Rates

Once operational, the project is expected to generate:

4.53 billion units of electricity annually

Rs 27.90 billion in revenue in the first year of commercial operation

Revenue rising to Rs 34.59 billion after eight years, assuming an annual tariff escalation of 3%

The projected average PPA rate in the first year is Rs 6.3 per unit, increasing to Rs 7.8 per unit after eight years.

Access Roads and Construction Progress

Pre-construction work is currently underway. Due to the project’s remote terrain, significant preparatory infrastructure is being developed:

A 21-km access road from the powerhouse site to the dam site is under construction.

A 70-meter steel arch bridge over the Arun River is being built to link the Koshi Highway with the project area.

The powerhouse is planned at Chongrang (Bhotkhola-4), while the dam site will be near Chepuwa (Bhotkhola-2).

Minister Ghising emphasized that Upper Arun will be one of Nepal’s most commercially viable and strategically important hydropower projects, adding that swift financial closure is the next key step.

A Key Project for Nepal’s Energy Future

With rising electricity demand in Nepal, growing export prospects to India and Bangladesh, and increasing global interest in South Asian clean energy markets, Upper Arun is being viewed as a transformative infrastructure investment. The project is expected to play a central role in:

Boosting Nepal’s energy security

Increasing exportable electricity volume

Attracting NRN investment

Enhancing Nepal’s profile in global renewable energy markets

Expanding mixed-model financing in national hydropower development

Officials say the government wants to ensure transparent, commercially strong, and investor-friendly project structuring to strengthen Nepal’s hydropower economy — a sector already drawing attention from international lenders, regional partners, and foreign investors.