Government Unveils Investment Modality for Budhi Gandaki Hydropower Project

The government has made public the detailed investment modality for the 1200 MW capacity Budhi Gandaki Reservoir Hydropower Project, which is considered strategic for Nepal’s energy security. The Ministry of Energy, Water Resources and Irrigation released the modality during a press conference on Tuesday, saying it will now expedite construction work.

According to the ministry, the project’s base cost stands at USD 2.77 billion (approximately Rs 374 billion), with an eight-year construction period. Including interest during construction amounting to Rs 32 billion, the total estimated cost is expected to reach Rs 406 billion. The government intends to raise capital for the project through a debt–equity ratio of 70:30.

The Government of Nepal will hold an 80 percent stake in Budhi Gandaki Company Limited, the project developer, while the remaining 20 percent ownership will be held by the Nepal Electricity Authority.

The government will earmark 50 percent of infrastructure development tax collected from imported petroleum products to the project.

The government’s total investment will amount to Rs 247.47 billion including Rs 97.47 billion as equity and Rs 150 billion in concessional loans. The Rs 45 billion already invested by the government will be converted into equity.

Meanwhile, the NEA will invest Rs 24.37 billion as equity. To improve financial viability, the government has proposed issuing Rs 30 billion in energy bonds. Banks, financial institutions, insurance and reinsurance companies, and public funds will be eligible to purchase these bonds.

A loan pool of Rs 104 billion will be arranged through co-financing by the Employees Provident Fund, Citizen Investment Trust, Social Security Fund, insurance and reinsurance companies, HIDCL, Nepal Telecom, and commercial banks.

The project is expected to generate 3.38 billion units of electricity annually—1.41 billion units in winter and 1.97 billion units in the rainy season. The proposed power purchase rates are Rs 12.40 per unit for winter and Rs 7.10 per unit for the rainy season, generating annual revenue of Rs 31.48 billion once electricity production begins. The generation licence will be valid for 50 years, allowing 42 years of electricity production if construction is completed within eight years.

Land acquisition, considered the most challenging part of the project, has progressed to about 90 percent. A total of Rs 42.65 billion has been distributed as compensation for land acquisition.