Chhujung Khola Hydropower Project Secures Rs 9 Billion Loan Led by Machhapuchchhre Bank

Kathmandu. Investment has been secured for the 63 MW Chhujung Khola semi-reservoir (PROR) hydropower project under construction in Bhotkhola Rural Municipality-2, Sankhuwasabha. A co-financing loan agreement has been signed among half a dozen banks and financial institutions led by Machhapuchchhre Bank for the project being developed by Sangrila Energy Limited.

According to the agreement, banks and financial institutions will invest a total of Rs 9 billion in loans for the project. The remaining Rs 3 billion will be invested as equity by Ghalemdi Hydro Limited and other promoters. In the co-financing arrangement, Machhapuchchhre Bank is the lead bank, while Prabhu Bank and Lumbini Development Bank are participating as co-lead banks.

Similarly, Muktinath Development Bank, NIC Asia Bank, and Sangrila Development Bank are participating as member banks. Chhujung is possibly the first hydropower project to secure financial management after the Bhadra 10 Bhote Koshi disaster.

Rs 9 Billion Loan and Rs 3 Billion Equity

The total estimated cost of the project is Rs 12 billion. Of this, Rs 9 billion is being financed through loans from banks and financial institutions, and the remaining Rs 3 billion through promoter equity.

The per-megawatt cost of the project is estimated at Rs 190 million. The project appears inexpensive in terms of per-megawatt cost. The project will be of a 4-hour semi-reservoir nature. With the completion of financial management, the necessary financial resources for the project's construction have been secured.

A power purchase agreement (PPA) has already been signed with the Nepal Electricity Authority. A feasibility study conducted by the company shows that the project will generate 37.18 million units of energy annually. Construction materials are being transported by helicopter to the project site at Yak Kharka, and excavation work is underway. The powerhouse of the project is proposed to be underground.

Once the project begins generating electricity, it is projected to earn Rs 2.27 billion in revenue in the first year. Similarly, by the ninth year of operation, annual revenue is estimated to increase to about Rs 2.84 billion. The project will receive a price increase of 3 percent annually from the Electricity Authority for 8 times.

According to the project's financial analysis, the return on equity (ROE) will be 25.67 percent and the internal rate of return (IRR) will be 15.47 percent. Looking at these two financial indicators, ROE and IRR, the project appears financially attractive and will provide good returns to investors.

Similarly, the project's benefit-cost ratio is 1.58 and net present value (NPV) is Rs 5.33 billion. The simple payback period is projected at about 5.73 years.

Ghalemdi Hydro's Rs 1.10 Billion Investment

Ghalemdi Hydro Limited has an investment of about Rs 1.10 billion as a major shareholder in the project. Ghalemdi operates the 5 MW Ghalemdi Khola Hydropower Project in Annapurna Narachang, Myagdi. With a large loan investment from banks and financial institutions secured for the project promoted by Sangrila Energy, the necessary financial foundation has been prepared to move construction forward.

Since the Chhujung Khola Hydropower Project is being built in the Bhotkhola area of Sankhuwasabha, it is expected to contribute to electricity generation in the region and the national transmission system once operational.

Electricity from the project's powerhouse will be integrated into the Electricity Authority's Shitalpati 220 kV substation located 55 kilometers away. The project will need to build a 55-kilometer long 220 kV double-circuit transmission line.

Sangrila Energy has signed an agreement to build the transmission line in partnership with half a dozen hydropower projects being developed in the river corridor. The company has stated that costs will be further reduced as other projects are also added to the corridor.

Similarly, the tree felling work required for the project has been completed. According to the policy of planting 10 trees for every tree cut, the project has provided Rs 36.3 million to the Forest and Land Conservation Department for planting and conserving trees. Currently, the project has completed a 14-kilometer long access road. The camp required for the project has also been completed.

After the agreement, Santosh Koirala, Chief Executive Officer (CEO) of Machhapuchchhre Bank, said that the banks and co-financing partners are committed to completing the project on time and connecting it to the national transmission system.

'This project must come into operation on time, without any obstruction. There will be no shortfall in investment from the bank's side. The promoter must also pay special attention to safety and quality,' he said.