The Export-Import (Exim) Bank of China has agreed to extend the grace period for the repayment of loans granted to Nepal to construct the Upper Trishuli 3A Hydroelectric Project.

The Nepal Electricity Authority (NEA), which is building the 60 MW project located in Rasuwa and Nuwakot districts through a subsidiary company, has asked for a five-year extension, but the Chinese bank is yet to decide the length. The grace period for repaying the loan expired in August.

The lender has agreed to stretch the timetable based on the project’s work schedule and completion date presented by the state-owned power utility, said NEA Managing Director Kulman Ghising. Top officials of the Exim Bank of China were in Nepal last week to discuss the future of the project and the repayment of the loan.  

The Chinese bank has extended a concessional loan worth $114.7 million at an annual interest rate of 1.75 percent for 25 years, with a grace period of five years. During the grace period, the borrower need not start the loan repayment process.

As the grace period of the loan expired in August, the bank wrote to the Finance Ministry and the NEA asking for repayment. In response, the ministry asked for an extension of the grace period saying that the construction of the project had been stalled.

China Gezhouba Group Company (CGGC), the contractor for the hydroelectric project, had stopped work on the project after a crucial access road was damaged by last year’s earthquake. The access road connects the project’s headworks and powerhouse.

Although the project contractor was supposed to build the access road, differences emerged over who should repair it. An NEA board meeting held on Friday resolved the dispute by deciding to request the government to have the Nepal Army repair the damaged road.

“If we ask the contractor to rebuild the road, the issue of cost variance will arise,” said Ghising. “Therefore, we decided to take the help of the Nepal Army.”

The consultant to the project and an independent team of experts have submitted a report saying that the damaged access road should be rebuilt by the NEA. Since the dispute has been settled, the contractor is likely to resume construction work at the project soon after the access road is rebuilt.

Meanwhile, the Finance and Energy ministries, NEA and Exim Bank of China have agreed to prepare a detailed work schedule of the project within the next 21 days.