Nepal is pivoting to develop the 210-megawatt Simbuwa Khola Hydropower Project using domestic resources after the World Bank withdrew its financing due to the project’s location in the Kanchenjunga Conservation Area. This move is part of a broader national strategy to enhance renewable capacity and achieve energy self-reliance. To this end, the Finance Ministry and the Hydroelectricity Investment and Development Company (HIDCL) are now tasked with arranging phase-wise investments from local sources.
World Bank’s Withdrawal and Nepal Hydropower Funding
The World Bank declined to provide financing, citing concerns over the project’s location within the Kanchenjunga Conservation Area, a critical habitat for endangered species like the snow leopard and red panda. This decision reversed the Bank’s earlier commitment to fund the project through its Private Sector Investment Facility. The project, with an estimated cost of $314 million, is being developed by Sanima Middle Tamor Hydropower Limited.
The withdrawal was a significant setback for the government, which had hoped to leverage international funding to attract foreign investment. However, this challenge has seemingly accelerated Nepal’s strategic shift towards mobilizing its own financial resources for critical infrastructure.
The Finance Ministry and HIDCL are now spearheading the effort to arrange domestic investments to ensure the project’s completion. Finance Minister Prakash Sharan Mahat has emphasized the government’s commitment to securing additional capital and exploring innovative funding models to maintain national control over this key energy asset.
Alternative Nepal Hydropower Funding Options
The government is actively exploring a variety of options to secure the necessary capital for the Simbuwa Khola project. This pivot to domestic financing is not an isolated event but reflects a larger, successful trend in Nepal’s energy sector.
A clear blueprint can be seen in the recently finalized investment models for the mega-projects, the 1,200 MW Budhigandaki and 1,063 MW Upper Arun hydropower projects. Both of these massive undertakings will be financed entirely through domestic investment, utilizing a structure of 30 percent equity and 70 percent loans. This model taps into a diverse pool of local capital, including contributions from provincial and local governments, the Nepal Electricity Authority (NEA), state-owned enterprises like Nepal Telecom, and major financial institutions such as the Employees’ Provident Fund and the Citizen Investment Trust.
For the Simbuwa Khola project, a similar strategy could be employed. This might involve issuing green bonds or other financial instruments designed to attract investment in renewable energy. Furthermore, the government can create consortiums of local financial institutions and development banks to secure the required capital, ensuring the project moves forward under Nepalese ownership and control.
Potential Benefits of the Project with Nepal Hydropower Funding
Despite the initial funding challenges, the Simbuwa Khola Hydropower Project holds immense promise for Nepal’s future. Once operational, the project will add 210 megawatts of clean, renewable energy to the national grid. This will be crucial in meeting the country’s rising energy demands, reducing its dependence on imported fossil fuels, and stabilizing the power supply.
This project is a key component of Nepal’s ambitious long-term energy strategy, which aims to develop an installed hydropower capacity of 28,500 MW by 2035. Beyond domestic consumption, projects like Simbuwa Khola will enhance Nepal’s capacity to export clean energy to neighboring countries like India, creating a valuable revenue stream and strengthening regional energy cooperation.
Locally, the project is expected to generate significant employment opportunities during its construction and operational phases, boosting economic development in the region. Ultimately, the successful completion of the Simbuwa Khola project will be a powerful symbol of Nepal’s growing capacity to fund and execute large-scale infrastructure projects, bolstering its long-term energy security and economic growth.
