OFID offers $13m to support hydro-electric plant in Nepal

The Opec Fund for International Development (OFID) has contributed more than $13 million to a $453 million financing package that will support the construction of a landmark hydroelectric plant in central Nepal.

International Finance Corporation (IFC) a member of the World Bank Group, is the lead arranger of the debt package, which includes eight other lenders, and is one of the largest foreign direct investments in Nepal’s history. The plant will increase Nepal’s electricity supply by one-third from today’s levels and provide clean, reliable power to some nine million people.

The financing is being provided to the privately-owned Nepal Water and Energy Development Company. The firm will develop and operate a 216 MW, run-of-the-river hydroelectric plant on the Trishuli River about 70 km north of Kathmandu. Officially known as Upper Trishuli-1, the project’s financing structure, competitive tariffs, and use of internationally accepted contract standards provides a model for future hydropower projects in Nepal.

The OPEC Fund’s Assistant Director-General, Private Sector and Trade Finance, Tareq Alnassar, said, “We are pleased to support a renewable energy development project of such strategic national importance. The hydropower plant and associated infrastructure will significantly increase Nepal’s domestic power supply and we will work in partnership with the DFI community to bring it to life. The project is also set to bring together the largest foreign direct investment in Nepal to date and demonstrates the crucial role that the private sector can play in supporting global development.”

In turn, Mengistu Alemayehu, IFC Director for South Asia, stated that this project represents a significant milestone in the development of Nepal’s hydropower potential as it has been able to attract meaningful private sector participation, particularly from international investors. It also shows the unprecedented resilience and commitment by the government, the sponsors, and other stakeholders against all odds over the years, including a major earthquake.

“We expect this project to become a model for expanded investments in developing Nepal’s hydropower to meet the growing domestic demand and export to the neighboring countries,” Alemayehu added.

Other financiers include the Export and Import Bank of Korea, the Asian Development Bank, the Asian Infrastructure and Investment Bank, the Korea Development Bank, CDC (the United Kingdom’s development finance institution), FMO (the Dutch Entrepreneurial Development Bank) and Proparco.

Meanwhile the OPEC Fund for International Development (OFID), has signed a $40 million loan agreement with Sri Lanka to co-finance the rehabilitation of an 18 km section of the A017 highway in the southern region of the country.

The project, known as the ‘Rehabilitation of the A017 Road Corridor Project (Rakwana – Suriyakanda)’ and co-financed with the government of Sri Lanka, is expected to help promote trade, reduce travel costs and time, and stimulate key sectors of the Sri Lankan economy such as agriculture, tourism, manufacturing and mining.

The loan was signed by the OPEC Fund’s Director-General Dr Abdulhamid Alkhalifa, and Secretary to the Treasury, Ministry of Finance of Sri Lanka Dr. Ranepura Hewage Samantha Samaratunga.

Dr. Alkhalifa described the project as an “integral part” of Sri Lanka’s development policy framework aimed at strengthening the transport sector and boosting socioeconomic growth. He added that the Opec Fund hoped to maintain its “excellent ties” with the country to further the fruitful partnership, which dates back to 1976.

Under this partnership the Opec Fund has approved a total of $373 million in public sector financing (including the new agreement) for development projects in Sri Lanka.

The OPEC Fund has also committed $115 million in private sector funding and trade finance to Sri Lanka in support of the country’s micro-, small- and medium-sized enterprises.

OFID was established in January 1976 by the then 13 member countries of Opec; including the United Arab Emirates. The Opec Fund for International Development (OFID) is the intergovernmental development finance institution established in 1976 by the Member States of the Organization of the Petroleum Exporting Countries (Opec). OFID was conceived at the Conference of the Sovereigns and Heads of State of Opec Member Countries, which was held in Algiers, Algeria, in March 1975. A Solemn Declaration of the Conference “reaffirmed the natural solidarity which unites Opec countries with other developing countries in their struggle to overcome underdevelopment”, and called for measures to strengthen cooperation between these countries.

WAM