The European Investment Bank (EIB) has granted a EUR 55 million (NPR approx 6.41 billion) loan to the Federal Democratic Republic of Nepal to finance the construction and operation of the Tanahu Hydropower plant.
The finance contract was signed today in Kathmandu by EIB Vice-President Magdalena Álvarez and Nepalese Finance Secretary, Shanta Raj Subedi. This signing takes place exactly one year after the signature of the Framework Agreement between the EIB and Nepal in a ceremony held in Kathmandu on 7 May, 2012.
EIB Vice-President Magdalena Álvarez Arza, who is responsible for the Bank’s operations in Asia, highlighted that the EIB “is delighted to see that its first loan to Nepal will eventually provide clean power to the country allowing households to enjoy electrical light, children to read after dark, hospitals and schools to function and entrepreneurs to invest and create jobs.” She added that “this loan shows our firm commitment to contribute to a stronger and sustainable dynamism of the Nepalese economy”.
The plant with an installed capacity of a 140 MWe will be built on the Upper Seti River, Tanahu District, in the central part of Nepal.
The project will contribute to meet peak electricity demand in Nepal during the dry winter season when the shortages are more acute and will operate as a base load power plant during the remaining period of the year. It will also generate significant economic benefits by providing a clean and reliable supply of electricity and will contribute to reduce the adverse impacts of climate change by displacing more polluting energy sources.
In addition, the project ensures that environmental and social impacts are addressed. The project includes a programme of rural electrification to supply power to 17 villages in the vicinity of the plant. A Community Development programme will be implemented for people living in the area, addressing education, health, gender development, social inclusion, economic development and livelihood activities.
The project will be co-financed by the Asian Development Bank (ADB), the Japan International Cooperation Agency (JICA) and the Abu Dhabi Fund for Development. The EIB funding represents 15% of the total cost of the project. This EIB loan comes under the current lending mandate for Asia and Latin America (ALA IV) and meets EU’s objectives and the general Bank’s mandate for ALA of supporting social and economic infrastructure and climate action.