IPPAN Seeks International Investment for Nepal's Energy Sector

Independent Power Producers' Association, Nepal (IPPAN) has taken a proactive step to attract international investment to bolster Nepal's energy sector. In a recent meeting held in Kathmandu, IPPAN officials engaged in discussions with representatives from Dutch Bank FMO. During the meeting, IPPAN urged FMO to consider offering long-term loans at favorable interest rates, emphasizing the substantial need for trillions of dollars in investments within Nepal's energy sector.

The government of Nepal recently canceled a power purchase agreement (PPA) for a 2,600-megawatt hydropower project due to financial management issues. This move underscored the vast investment potential in Nepal's energy sector.

The government has set an ambitious target of generating 35,000 megawatts of electricity within the next 12 years. Recognizing that Nepali banks alone may struggle with the financial management of these projects, it is crucial to collaborate with international partners like FMO, especially given the prior cancellation of the 2,600-megawatt PPA due to financial challenges.

FMO has expressed its willingness to facilitate significant investments in Nepal's energy sector, contingent upon hydropower promoters in Nepal aligning their efforts with environmental, societal, and governmental considerations. FMO highlighted its ongoing cooperation with IPPAN since 2019 and expressed confidence in IPPAN's capacity to adhere to international standards such as those set by the International Finance Corporation (IFC) and Environmental, Social, and Governance (ESG) principles.

Presenting statistics on Nepal's hydropower production and future projects, it was revealed that approximately 1 Kharba 13 Arba dollars would be required for investment in 1,224 projects with a cumulative capacity of 53,431 megawatts, at various stages of development.

This investment requirement includes 5 Arba for 191 completed projects with a capacity of 2,900 megawatts, 129 projects under construction with a capacity of 7,107 megawatts, and 6 projects with a capacity of 94,215 megawatts intended for export, necessitating an additional investment of 95 Arba dollars.

Furthermore, 129 projects are awaiting construction through PPA, requiring 5 Arba, and 185 projects with a capacity of 9,400 megawatts are awaiting PPA following the completion of studies, necessitating an immediate investment of 20 Arba dollars.

Given the government's strategic plan to produce over 30,000 megawatts of electricity during the Energy Decade, an extra investment of 60 Arba dollars is deemed necessary.

IPPAN has called upon FMO to consider providing long-term loans at favorable interest rates, either through Nepal's banks or direct investments. They have also encouraged FMO to take a leadership role in investment within Nepal's energy sector, either independently or in collaboration with other international banks and financial institutions.

FMO has a track record of investment in Nepal's hydropower sector, including over 50 million dollars and 9.6 billion rupees invested through NMB Bank. Additionally, FMO has played a pivotal role in securing an 8 Arba loan from the German Development Bank and the OPEC Fund for the 82 MW Lower Solu Hydropower Project, and it has directly invested 2 billion rupees in the 216 MW Upper Trishuli-1 Hydropower Project.