The Nepal Water and Energy Development Company (NWEDC) on Friday executed the financial closure of the 216 megawatt Upper Trishuli 1 Hydroelectric Project with a consortium of nine international lenders agreeing to inject $453 in debt financing for the construction of the scheme in Rasuwa District.

International Finance Corporation, Asian Development Bank, Asian Infrastructure Investment Bank, Export-Import Bank of Korea, Korea Development Bank, CDC Group, Netherlands Development Finance Company, PROAPRCO Development Financial Institution and The OPEC Fund for International Development will cover the debt portion of $674 million hydroelectric scheme expected to go into operation in 2024.

"This project is a game-changer for Nepal," said Barshaman Pun, Minister of Energy, Water Resources and Irrigation. "Not only will it power hundreds of thousands of homes and businesses, but it will also serve as an example of how private companies can help Nepal expand its hydropower sector and attract much needed foreign direct investment."

The Upper Trishuli-1 Hydropower Project is designed to generate annual energy of 1,533 GWh from three power generating units of total installed capacity 216 MW.

38.75 percent of the total annual energy will be generated in the dry season and the remaining 61.25 percent of energy will be generated in the wet season. The electricity generated by the plant will be evacuated to the under-construction Trishuli-3B Hub substation in Nuwakot.

"There is no question that Nepal has the potential to be an energy powerhouse," said Bo-Seuk Yi, CEO of the Nepal Water and Energy Development Company. "To realise that promise, Nepal can enlist the help of private companies, which have the capital and expertise to make major projects a reality."

Earlier, the company had seen a funding oversubscription with nine multinational lenders offering a loan of $631 million against the $453 million required in debt finance.

In July, the Cabinet decided to extend the tax holiday to the company a few weeks after the anti-dollar alliance — Asian Infrastructure Investment Bank — approved its first $90 million loan to the project, raising eyebrows over the government’s decision to give tax holiday for the company which has a dollar-denominated power purchase agreement with the power utility.

As per the provisions, the company will be exempted from 100 percent of income tax for the first 10 years of commercial operation and 50 percent exemption for an additional five years.

The developer and the Energy Ministry signed a project development agreement in December 2016. As per the terms of the agreement, the sponsors—a Korean consortium, local promoter and International Finance Corporation—will be responsible for the design, engineering, financing, construction, completion, commissioning, ownership, operation and maintenance and transfer of the project.

The company aims to start construction of the project in 2020 after the approval of the financing agreements by the Nepal Rastra Bank.

Earlier, the project had sunk into uncertainty after the developer threatened to pull out from Nepal over a foreign exchange hedgerow with the government after it asked the developer to contribute a hefty sum to a hedge fund which would be used as a cushion against exchange rate risk.

When the Nepal Electricity Authority signed a power purchase agreement with Nepal Water and Energy Development Company a year ago to purchase the electricity generated by the project, the state-owned power utility agreed to pay in US dollars for a period of 10 years or until the portion of the investment made with foreign loans is recovered by the developer, whichever comes first.

After the row over hedge fund, the developer agreed to provide 17 percent of the energy to the power utility free after 14 years and the government and electricity authority agreed to contribute two-thirds of the amount to the hedge fund.