The World Bank will be the lead international financial institution to finance the construction of the project that lies in the upper reaches of the Arun River at Bhotekhola Rural Municipality of Sankhuwasbha district.
"An agreement with the World Bank will be reached soon," said a senior official at the NEA. The World Bank is giving concessional loans in collaboration with the European Investment Bank. "The World Bank has already promised to provide loans for this project. We are working to make a financial agreement with the World Bank within this year," said the NEA source. The project will be developed under a 70:30 debt-to-equity ratio. According to NEA, the project will be funded with Rs 150 billion in loans including Rs 97 billion from international financiers and Rs 53 billion from domestic creditors. This is the first time the global lender is back in the hydropower project in the Arun River after the debacle of the Arun-3 project in the mid-90s. According to NEA, Rs 53 billion rupees will be raised from a consortium of domestic institutions including Hydropower Investment and Development Company Limited (HIDCL), Nepal Bank, Rastriya Banijya Bank, and Citizen Investment Trust. A preliminary memorandum of understanding has been signed between the promoter company Upper Arun Hydropower Limited and these institutions in August last year. NEA plans to sign the final agreement with the World Bank and domestic institutions at the same time. The promoter company Upper Arun Hydropower Limited will invest 30 percent i.e., Rs 64.46 billion in the project as equity. The government had advanced the concept of this project in 1985 and a feasibility study was done in 1986. The government in 2011 had entrusted the development of the project to NEA. Currently, works are being carried out to design the tender for the construction of the project. NEA plans to start the construction of the project in 2024. It is estimated that the project will take about 6 years to complete the project which is the picking run-of-river project. NEA has said that about 100 meters high will be constructed on the Arun River and the water will be channelized through an 8.5 km long tunnel to an underground hydroelectric plant in Chongrak. The project will generate 4.51 billion units of electricity annually. That electricity from the project will be connected to the substation at Haitar Sankhuwasabha by constructing a 400 kV double circuit transmission line about 6 km long from the powerhouse.
