Upper Trishuli-1 Hydropower Project

Project description

On December 6, 2019, the Multilateral Investment Guarantee Agency issued a guarantee for US$87.4 million to Korea South-East Power Co., Ltd. (KOEN) of Korea covering its equity investment in the Upper Trishuli-1 Hydropower Project (“UT1” or the “Project”). The MIGA guarantee provides protection against the risk of Breach of Contract for a period of up to 15 years. MIGA will share the exposure risk by utilizing the MIGA Guarantee Facility under the Private Sector Window.

The Project consists of construction, operation, and maintenance of a 216-megawatt run-of-river hydropower plant on the Upper Trishuli river in Nepal, owned by a special purpose vehicle, Nepal Water & Energy Development Company Pvt. Ltd. The Project will sell power to Nepal Electricity Authority, the national utility, for domestic supply under a 30-year power purchase agreement (“PPA”). The Project will be developed on a Build, Own, Operate and Transfer (“BOOT”) basis under a 35-year concession agreement (Project Development Agreement or “PDA”) with the Government of Nepal represented by the Ministry of Energy, Water Resources and Irrigation.

The Project is of strategic national importance and will be the largest Foreign Direct Investment (“FDI”) in Nepal to date, increasing the country’s domestic power supply by approximately 20% compared to today’s levels and providing about 40% of its expected 1,456 GWh of net annual output during the dry season, which includes the peak winter demand months. The Project’s expected commissioning date is March 2024.     

 Environmental Categorization

The project is a category A under MIGA’s Policy on Environmental and Social Sustainability. Click here to view the Environmental and Social Review Summary prepared by the International Finance Corporation (IFC) for their investment in the project.

 Development Impact

The Project is expected to have positive impacts at both a sector and project level: (i) Demonstration effect: First, UT1's PDA and PPA are expected to become model project documents for FDI in Nepal's hydropower sector. Second, efforts on managing cumulative impacts, impact on aquatic habitat and benefit sharing through local share ownership are expected to set a sustainable benchmark for future hydropower development. (ii) Increased electricity generation: The Project is expected to supply baseload power for domestic consumption of 1,446 GWh per year to reach about 9 million people and reduce dependence on power imports. A large share (nearly 40%) of UT1's output is expected to be in the dry season, which includes the peak winter demand months. (iii) Climate change mitigation and adaptation: The Project includes substantial capital expenditures for design elements that improve the Project's resilience to potential climate change impacts. (iv) Benefits to local economy and livelihood: The Project's benefits include construction-phase employment of 1,100 workers, a local skills training program, 0.5% of Project costs for community development, up to 10% of Company shares offered to Project Affected People, and 20 kWh of monthly free rural power given to nearby/eligible households.