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The government has approved the financial investment model for the 1,200-megawatt reservoir-based Budhi Gandaki Hydropower Project.

A Cabinet meeting held on Tuesday decided to endorse the financial investment framework for the Budhi Gandaki reservoir-based hydropower project.

According to the government, around NPR 39 billion has already been spent on compensation distribution in the project-affected areas. An additional approximately NPR 80 billion will now be invested in the same project. To ensure construction, the government plans to allocate about NPR 22 billion annually in the budget for the next eight years.

The project, which will be constructed in Dhading and Gorkha districts, has an estimated base cost of USD 2.77 billion (approximately NPR 374 billion). Including interest accrued during the construction period, the total estimated cost is expected to reach NPR 406 billion.

According to the approved financial structure, 70 percent of the investment will be mobilized through debt financing and 30 percent through equity. In the promoter company, Budhi Gandaki Hydropower Company Limited, the Government of Nepal will hold 80 percent ownership, while the Nepal Electricity Authority will hold 20 percent.

On behalf of the government, a total of NPR 248 billion will be invested — including NPR 97.47 billion in equity and NPR 150 billion in concessional loans. The Nepal Electricity Authority will invest NPR 24.37 billion under the equity component.

According to the modality presented to the Cabinet, NPR 35 billion will be mobilized from the Nepal Electricity Authority (excluding infrastructure tax), while around NPR 90 billion is planned to be raised by issuing shares to the general public.

The government will also invest in the project by covering customs duties and Value Added Tax (VAT) incurred during construction. In addition, it has been decided that 50 percent of the infrastructure tax collected from petroleum imports will be allocated to the project.

There are plans to issue “Energy Bonds” worth NPR 30 billion, which will be counted under the liquidity ratio. Banks and financial institutions, insurance companies, and government funds will be eligible to invest in these bonds. The financial structure also includes a proposal to raise approximately NPR 104 billion in loans from banks and financial institutions.

The project is estimated to generate 1.41 billion units of electricity during the dry season and 1.97 billion units during the rainy season, totaling 3.38 billion units annually. The proposed power purchase rate is NPR 12.40 per unit in the dry season and NPR 7.10 per unit in the rainy season.

According to the government, around 90 percent of the required land acquisition has already been completed. The project is expected to affect 8,117 families in Gorkha and Dhading districts, of which 3,560 families will be fully displaced. Following the construction of a 263-meter-high curvature arch dam, the reservoir will spread over approximately 63 square kilometers.

The government has stated that the project is being advanced as a strategic initiative that will not only generate electricity but also promote tourism, create employment opportunities, support fish farming development, and provide multiple downstream benefits. The target is to bring the project into commercial operation within eight years.

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