Tanahu Hydropower Limited (THL) on Monday signed a contract with CMC Ravenna of Italy and Sinohydro Corporation of China to build the Tanahu Hydropower Project, a 140 MW reservoir-type plant located in central Nepal.

THL, a wholly-owned subsidiary of the Nepal Electricity Authority (NEA), finally appointed Italian and Chinese contractors to execute two different components of the scheme, more than two and a half years after initiating the public procurement process.

CMC Ravenna has bagged a Rs20.64 billion contract to implement the first package of the hydropower plant which includes the formulation of a detailed design and the construction of the headworks. Sinohydro Corporation will execute the hydromechanical and electromechanical works under the second package of the project for $114.18 million and Rs3.83 billion.

As per the contract, both contractors have to mobilize their workforce at the project side within two months. THL’s initial plan was to mobilize the contractors at the site by October 2016, but it was delayed by more than two years due to holdups in the selection of the contractor.

THL said the construction of the power plant would be carried out on a war footing with the target of starting production in the next five years and two months. “There will be no more delays in the construction of the project,” said Pradeep Kumar Thike, managing director of THL. “We are committed to generating electricity from the project in the next five years and two months.”

The NEA subsidiary has completed the pre-construction works and an access road to the project site. It has also made compensation payments to around 95 percent of the landowners whose lands were taken over for the development of the reservoir project.

THL has signed a power purchase agreement (PPA) with the NEA to sell the electricity generated by the plant. As per the PPA, the NEA will pay THL Rs12.40 per unit during the dry season, which lasts from December to May, and Rs6.08 per unit during the wet season, which lasts from June to November.

The PPA also includes a provision under which THL can increase the power purchase rate by 3 percent annually for eight years after it commences commercial generation. After the increase, the NEA will have to pay Rs15.38 during the dry season and Rs7.54 during the wet season.  

The Tanahu Hydropower Project will be one of the biggest reservoir-type projects in the country with an estimated annual energy generation capacity of 587.7 gigawatt hours in the first 10 years of operation. The project can generate energy for six hours daily during the dry season. The NEA subsidiary is developing the project using a credit facility extended jointly by the Asian Development Bank, Japan International Cooperation Agency and European Investment Bank (EIB). The project is estimated to be built at a cost of $550 million.