Nepal, Japan sign Rs 14 billion loan for Tanahun hydel project
KATHMANDU, MAR 14 -
The Japan International Cooperation Agency (JICA) has signed a soft loan agreement for the Tanahun Hydropower Project, ending a decade-long hiatus in official development assistance (ODA) to Nepal .
“JICA has decided to extend this loan agreement which is the first in 12 years,” said the agency in a press statement. “JICA will continue to contribute to Nepal ’s economic growth and social development in through three types of assistance— Japan ese ODA loans, technical cooperation and grant aid.”
JICA had stopped signing new ODA accords since 2001 citing political instability. Its last loan agreement was for the Melamchi Drinking Water Project.
The ODA loan agreement for the Tanahun Hydropower Project signed on Wednesday is worth Rs 14.168 billion (15.137 billion Japan ese yen). The 140 MW reservoir project is located in Tanahun district in western Nepal .
JICA is the largest financing partner for the project. The loan has a maturity period of 40 years including a grace period of 10 years. “ Nepal does not have to pay any interest on the loan during the grace period,” said Madhu Kumar Marasini, chief of the International Economic Cooperation Coordination Division (IECCD) at the Ministry of Finance.
Marasini signed the agreement on behalf of the government. He said that the loan carries an interest rate of 0.01 percent and a consulting service charge of 0.01 percent. Masataka Nakahara, director general, South Asia Department of JICA, signed the agreement on behalf of JICA.
Similarly, the exchange of note on the project was signed and exchanged between finance secretary Shanta Raj Subedi and Japan ese ambassador to Nepal Kunio Takahashi. The Tanahun Hydropower Project will be the second biggest storage-type project after Kulekhani. As per the project’s estimated cost, it will need to sign a power purchase agreement with the Nepal Electricity Authority (NEA) at the rate of Rs 7 per unit. A feasibility study carried out by the NEA has estimated the project to cost Rs 40 billion.
Apart from JICA, the Asian Development Bank (ADB), the European Investment Bank (EIB) and the Abu Dhabi Fund are co-financing the project. The ADB has pledged soft loans worth US$ 150 million at 1 percent interest. The EIB has promised to provide US$ 50 million at 1 percent interest while the Nepal government will invest US$ 71 million.
Marasini said the loan accord with JICA proves that Nepal is still recognized as an investable country among donor agencies despite its political and economic turmoil. “The loan agreement with JICA is not only significant due to the monetary value.
It shows that we have regained donor confidence in our development projects.” He added that the government would sign loan agreements with the ADB and the EIB within a month. Meanwhile, Mahesh Acharya, managing director of Tanahun Hydropower Development Company (THDC), said that construction would begin in March 2014, and that commercial energy generation would start in January 2020. The project completed its environmental impact assessment (EIA) in 2009 and its detailed project report (DPR) is at the final stage of preparation.
The government has clarified that it will extend credit to the NEA at an interest rate not higher than what it pays the donors. However, the government will charge the NEA 1 percent of the loan amount as processing and guarantee fees. The NEA will have to bear the risk of fluctuations in the exchange rate.
Source: The Kathmandu Post
