India developer to build Nepal’s 402-MW Arun 3

The government of Nepal has awarded a contract to India hydro developer Satluj Jal Vidyut Nigam Ltd. (SJVN) to build the 402-MW Arun 3 hydroelectric project on the Arun River in Nepal’s Shankhuwasabha District.

Nepal news media reported officials of the Ministry of Water Resources signed a memorandum of understanding March 2 with officials of SJVN, a joint venture of India’s Himachal Pradesh State and its federal government.

SJVN is authorized to arrange funding and develop the estimated US$860 million project over five years and to operate it for 30 years on a build-own-operate-transfer basis.

In competition with eight other bidders, SJVN agreed to provide 21.9 percent (88 MW) of the project’s power free of charge to the government of Nepal. It also is to: reimburse the government for a US$7 million feasibility study of the project; pay a royalty of 7.5 percent of project income to the government; remit a .5 percent export tax on power; and present bank guarantees of 100,000 rupees (US$2,483) per megawatt for a survey license and 500,000 rupees (US$12,418) per megawatt for a power generating license.

The India company also is to perform an environmental assessment and to build an access road and transmission line.

Nepal announced bidding in December 2006 to develop Arun 3, 300-MW Upper Karnali, and 600-MW Budhi Gandaki (or Burhi Gandaki) hydroelectric projects.

India’s GMR Group was awarded a contract in January to build Upper Karnali. (HNN 2/1/08) It also was listed as the top-ranked bidder to develop Arun 3. However, the government decided to allocate only one project per developer, resulting in the Arun 3 award to SJVN.

Arun 3 originally was to be developed in the early 1990s. However, the World Bank withdrew funding support in 1995 due to objections to the project’s cost and environmental effects.

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