ADB Assists Nepal in Implementing West Seti Hydroelectric Project

News Release | 27 November 2007

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is assisting Nepal in the implementation of a hydroelectric power project to be undertaken in partnership with the private sector.

The Technical Assistance to Nepal for Preparing the West Seti Hydroelectric Project will be funded by a $300,000 grant from ADB's Regional Cooperation and Integration Fund, a special fund financed out of ADB's net income to support technical assistance activities. Nepal will contribute $100,000 to complete the funding requirement.

The assistance will help the government of Nepal prepare a framework to manage revenue generated from power exported from the West Seti facility to India.

"Revenue management should comply with the highest standards of governance and accountability. The proceeds should be properly used for poverty reduction programs, including improved delivery of social services," said Neside Tas-Anvaripour, senior finance specialist for energy of ADB's South Asia Department.

The technical assistance will also identify the needs of the communities in the project area in terms of area development and livelihood programs.

West Seti involves the construction and operation of a 750-megawatt hydroelectric power generation facility on the Seti River in the far western region of Nepal, one of the most underdeveloped areas in the country. The development will be undertaken using a build-operate-transfer (BOT) formula, which essentially means the private sector developer will construct the facility, and operate it for a certain period of time before transferring the plant to the government.

West Seti Hydro Ltd. signed a project agreement with the government of Nepal in 1997. Under the agreement, the government will grant all licenses to West Seti Hydro Ltd. for the development, construction and operation of the hydroelectric facility, including generation and transmission licenses, for 30 years from the date of issue of the license.

Eventually, ADB, through its public sector lending program, will provide funding for the government's equity participation in the hydroelectric power project, while its private sector department prepares a combination of equity, loan and guarantee for the project.

Nepal is well positioned to develop hydroelectric energy as a major source of economic growth and is entering a period of economic expansion that will depend on effective management of one of its main natural resources - river water. The country also needs to consider harnessing its vast hydroelectric power potential in a socially and environmentally sustainable manner. Revenue from the operation will facilitate the implementation of the government's poverty reduction initiatives and long-term sustainable development.