The Asian Infrastructure Investment Bank (AIIB) has approved funding totaling almost US$92 million for hydropower projects and power distribution system upgrades in Nepal – the bank’s first investment in the country.

AIIB is giving a loan of up to US$90 million for the Upper Trishuli-1 Hydropower Project, which is expected to increase the country's power generation by almost 20%, helping to reduce acute power shortages in the country. It has also provided Nepal with US$900,000 for the proposed Tamakoshi V Hydroelectric Project and US$1 million for the proposed Power Distribution System Upgrade and Expansion Project from its Project Preparation Special Fund  which provides grants to support the preparation of projects in eligible AIIB members. These grants are part of AIIB’s overall efforts in Nepal to increase energy generation capacity, reduce the demand-supply gap, upgrade transmission infrastructure and reduce electricity system losses.

“We recognize that power supply shortages in Nepal have caused significant delays in the restoration of infrastructure and services impacted by the 2015 earthquake,” said AIIB Vice President and Chief Investment Officer D.J. Pandian. “By investing in hydropower and encouraging further private sector investment in the country, we will help drive economic growth and poverty alleviation efforts.”

Cofinanced with the International Finance Corporation, Asian Development Bank and other development institutions, the project involves a US$650 million investment, financed entirely by foreign capital. It aims to serve as an example of how to facilitate investments in the sector.

“AIIB’s investment will provide much-needed, long-term financing for a vital infrastructure project,” said AIIB Director General Dong-ik Lee. “We are confident that our investment will demonstrate the viability of Nepal’s sustainable energy sector to other potential private-sector investors.”

The Upper Trishuli-1 project is a 216MW greenfield run-of-river hydropower plant to be developed on the Trishuli river under a build-own-operate-transfer model. The project will sell power to the Nepal Electricity Authority under a Power Purchase Agreement.