Nepal, India firm sign development pact for 900-MW Upper Karnali hydro project

Karnali River

The Investment Board of Nepal and India builder GMR Group have signed a project development agreement for construction of the 900-MW Upper Karnali hydro project on Nepal's Karnali River.

The government awarded a contract in 2008 to GMR and consortium partner Italian-Thai Development Project Co. of Thailand to build Upper Karnali, then rated at 300 MW.

Following approvals by the Investment Board and Nepal's Cabinet, the development agreement was signed September 19 in the presence of Nepal Prime Minister Sushil Koirala and India Home Minister Rajnath Singh.

Upper Karnali is to be built in about five years in Nepal's Surkhet, Dailekh and Achham districts as a power export project. It is to deliver power to the Power Grid Corp. of India grid in India by a 400-kilovolt double-circuit transmission line.

The project is to deliver 12 percent of its power free of charge to Nepal. The Nepal Electricity Authority will hold 27 percent ownership in the project, with 100 percent transferred to the government at the end of a 25-year concession period.

"The development of the Upper Karnali project will be beneficial for both countries, leveraging on each other's strengths and resources," GMR Group Chairman G.M. Rao said. "We are committed to the development of the project and the betterment of the communities in the region."

Financial closure is expected in September 2016, with commercial operation expected by September 2021.

GMR received the build-own-operate-transfer contract in 2008 as the result of Nepal's first international competitive bidding process to award a large hydro project. However, the project was delayed by changes in Nepal's government and calls for Nepal's hydropower not to be exported.

The World Bank provided technical assistance to the Nepal Investment Board in 2012 to review feasibility studies of the Upper Karnali, 650-MW Tamakoshi, 600-MW Upper Marsyangdi and 900-MW Arun 3 hydro projects.

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