Domestic Investment Model Prepared for 454 MW Kimathanka Arun Project

An investment framework has been prepared to develop the 454 MW Kimathanka Arun Hydroelectric Project with domestic capital. Conceptualised as a peaking run-of-river (PRoR) scheme, the project is planned to be built at Bhotkhola Rural Municipality–2 in Sankhuwasabha district in north-eastern Nepal.

The project, estimated to cost Rs 97.94 billion including interest during construction, will be implemented by Vidhyut Utpadan Company Limited, in which the government and state-owned institutions are founding shareholders.

Under the proposed financing structure, 70 percent of the total cost, or Rs 68.55 billion, will be raised through debt and the remaining 30 percent, or Rs 29.38 billion, as equity.

Debt financing is proposed through co-financing from the Hydroelectricity Investment and Development Company Limited (HIDCL), the Employees Provident Fund, the Citizen Investment Trust, the Social Security Fund, insurance companies, and banks and financial institutions.

The equity portion will be raised by issuing shares to the company’s promoters, non-resident Nepalis and Nepalis working abroad, local residents of project-affected districts, members of extremely poor households, and the general public.

Minister for Energy, Water Resources and Irrigation Kulman Ghising, while reviewing the proposed investment modality and its financial analysis, directed officials to update the project’s estimated cost and immediately proceed with financial management accordingly.

Noting that Vidhyut Utpadan Company holds licences for several hydropower projects but has yet to begin construction on any, Ghising said the Kimathanka Arun project should be developed by the company itself to ensure long-term income and sustainability.

He also instructed that the proposed investment structure and the institutional equity plan be promptly approved by the company’s board of directors and submitted.

So far, Rs 731.4 million has been spent on studies and pre-construction works. Land acquisition has been completed for the project office and staff camp. Compensation rates have also been fixed for land required for the dam, reservoir, powerhouse, and other structures, with an estimated cost of around Rs 450 million.

The project is expected to generate 2.69 billion units of electricity annually, equivalent to 2,690.97 gigawatt-hours. Winter peak and off-peak generation will account for 473.1 million units and 353.3 million units, respectively, while monsoon generation will total about 1.86 billion units. Annual revenue from electricity sales is estimated at Rs 16.91 billion.

In Vidhyut Utpadan Company Limited, the government holds a 30 percent stake. Nepal Electricity Authority, the Employees Provident Fund, and Nepal Telecom each hold 10 percent. The Citizen Investment Trust holds 5 percent, HIDCL 4 percent, and Rastriya Jeevan Beema Company 2 percent as promoter shares. A total of 29 percent shares have been allocated to the general public.