A delegation from the Asian Infrastructure Investment Bank (AIIB) is visiting Nepal as early as this month to appraise the rural electrification project in the western region and a hydropower project, which the government is planning to build using soft loan provided by the China-funded multilateral lender.

The mission, according to the Ministry of Finance, will arrive in Nepal at the end of September or early October to take stock of various projects proposed by different ministries and government agencies for construction using AIIB’s funds.

Top on the list are rural electrification project in the hilly districts of Province 6 and Tamakoshi 5 Hydropower Project. These two projects were proposed by Nepal Electricity Authority (NEA), the state-owned power utility.

“If the mission approves the projects, a proposal will be tabled at AIIB’s board to secure funds,” said Baikuntha Aryal, head of the International Economic Cooperation Coordination Division at the Ministry of Finance. “Once the board approves the projects, the AIIB will sign a loan agreement with the government.”   

NEA Managing Director Kulman Ghising said the AIIB is very positive about funding the rural electrification project in Province 6.

“We have asked for loan assistance of Rs10 billion for rural electrification and the multilateral lender, during informal communications, has shown interest in funding the project,” said Ghising.

NEA is also upbeat about securing funds from the multilateral lender to build 87MW Tamakoshi 5 Hydropower Project. NEA has sought a loan of Rs13 billion from the AIIB to build the project. Tamakoshi 5 Hydropower Project is a cascade of Upper Tamakoshi Hydropower Project, which is currently under construction.

“Per megawatt construction cost of the hydropower project is less than Rs150 million.

This cost-effectiveness is likely to appeal to the lender,” said an NEA official. “We are confident the AIIB will be interested in financing the project.”

The water from the tail race of the Upper Tamakoshi Project will be channelled via underground tunnel to the intake tunnel of Tamakoshi 5 to generate electricity.

As Tamakoshi 5 will generate electricity using water released by the tail race of Upper Tamakoshi, no separate dam needs to be built. This will reduce the cost of building the project and make it environmentally friendly.

“The project meets the ‘lean, clean and green’ criteria that the multilateral lender envisions to finance,” said a source.