Korean energy giant proposes to build Chainpur-Seti and Upper Modi plantsThe two potential hydroelectric schemes have a combined capacity of 270 megawatts.
The state-owned energy giant produces 23 percent of the energy consumed in South Korea and 79 percent of its hydroelectricity.
Korea Hydro executives made the offer during a recent meeting between Nepali and Korean energy officials in Seoul on the sidelines of the International Renewable Energy Conference.
The Koreans proposed to develop the Chainpur-Seti plant at Dhamena in Bajhang district and the Upper Modi scheme and its cascade in Parbat district. The 210-megawatt Chainpur-Seti is located on the Seti River and the 60-megawatt Upper Modi will be built on the Modi River.
Korea Hydro, which supplies more than 30 percent of the power consumed in Korea through its mix of energy sources including nuclear plants, hydel schemes and pumped storage electricity plants, implemented the hydro mechanical and electro mechanical works for the Chameliya hydroelectricity project in Darchula in 2017.
“We have gained experience working in Nepal as the contractor for the Chameliya hydroelectricity project, and now wish to play a part in developing the Chainpur-Seti and Upper Modi schemes,” said Kim Sang-don, executive vice-president of the company's Global Business Division and Project Division.
According to Kim, the company has received positive feedback on the project proposal from stakeholders including potential financer Export-Import Bank of Korea.
Korea Hydro has sent a proposal to Nepali energy officials to execute Chainpur-Seti as a peaking run-of-the-river scheme by setting up a special purpose vehicle with 30 percent equity investment.
This project is in the government's basket under the ambitious People’s Hydroelectricity Programme, and the equity sponsors in the special purpose vehicle would be the Nepal Electricity Authority, Korea Hydro and Nuclear Power, a consortium of private Korean developers and ordinary Nepalis buying shares in the project.
According to officials present at the meeting, the Korean company has also proposed to secure up to 70 percent in debt financing with lending facilities from Korea Exim Bank, Asian Development Bank and International Finance Corporation, among others.
If the plan materialises, Chainpur-Seti and Upper Modi will be the second investment by South Korean developers in Nepal’s hydroelectricity after Upper Trishuli 1 which is being built by Nepal Water and Energy Development Company.
A $453 million financial closure of the 216-megawatt scheme was performed recently with nine international lenders.
The total cost of Chainpur-Seti, with a projected annual output of 1120 gigawatt hours, is expected to reach $438.65 million including interest during the construction phase. The Korean developer surveyed the scheme in 2017, and it is likely to be built under a public-private-partnership model.
According to the Korean company, the Upper Modi scheme can be developed as per the procedures laid out under Economic Development Cooperation Funding by the Export-Import Bank of Korea.
As per the company’s proposal, the Nepal Electricity Authority and the government after concluding the feasibility study for proposed 42 megawatt Upper Modi A and 18 megawatt Upper Modi plants can forward a loan request under the aforementioned procedure.
Following an appraisal decision by the South Korean government and the bank, the company has plans to enter an agreement with the power utility and develop the project under engineering, procurement and construction model at a cost of $150 million.
“Investments from the Korean side is expected and it will be easier to land the project through state-backed funding mechanisms through Export-Import Bank of Korea,” said Kulman Ghising, managing director of the Nepal Electricity Authority. “We are positive about forwarding the financing requests after holding consultations with the Finance Ministry.”
According to Ghising, more deliberations will be required to sort out issues pertaining to equity participation and financing parties since the Chainpur-Seti scheme has been put in the government's basket under the People’s Hydroelectricity Programme.