The long-awaited 1,200 MW Budhi Gandaki reservoir-based hydropower project is moving a step closer to construction after the Ministry of Finance (MoF) and the National Planning Commission (NPC) approved its financing modality.

Two months ago, the Ministry of Energy, Water Resources and Irrigation prepared the funding modality of the Budhi Gandaki project, which has been planned to be constructed with domestic investment. Unveiling the progress on social media, Energy Minister Kulman Ghising noted it as the cornerstone to take forward the project construction.

The government aims to construct both hydropower projects with domestic investment. The proposed modalities include generating funding through the issuance of initial public offerings of Nepal Electricity Authority (NEA) shares to migrant workers and non-resident Nepalis and floating primary shares of the projects to the general public. Likewise, the issuance of energy bonds, taking concessional loans from the government, and mobilization of funds generated from the imposition of the infrastructure development tax on petroleum products are also on the cards.

Budhi Gandaki Hydropower Project is planned for construction across Dhading and Gorkha, with a net estimated cost of US$2.77 billion (around Rs 374 billion). The timeline for the completion of the project is eight years, and its total cost is expected to reach Rs 406 billion, including interest.

The proposed financing modality sets a 70:30 loan-to-equity ratio. The government will hold an 80 percent stake in Budhi Gandaki Company Limited, the project’s promoter, while the Nepal Electricity Authority will own the remaining 20 percent.

The total investment of the government will amount to Rs 248 billion, including Rs 97.47 billion for equity and Rs 150 billion for concessional loans. As of now, the government has spent Rs 45 billion on the compensation of land plots for locals affected by the project.

Likewise, the government will allocate 50 percent of the infrastructure development tax collected from imported petroleum products to the project.

Budhi Gandaki Hydropower Project is expected to generate 3.38 billion units of electricity, including 1.41 billion units in the winter season and 1.97 billion units in the rainy season. The tariff for the electricity generated from the project has been fixed at Rs 12.40 and Rs 7.10 per unit for the winter and rainy seasons, respectively.

The project will generate an annual income of Rs 31.48 billion, while the project’s electricity generation license has been proposed to last for fifty years. If the project is completed within the stipulated period of eight years, electricity will be generated for the next 42 years.