Budhigandaki Hydropower Project: $3 Billion Financing Model Finalized for 8-Year Construction Target
Budhigandaki Hydropower Financing Model
25th November 2025, Kathmandu
Nepal has unveiled the definitive investment blueprint for the ambitious Budhigandaki Reservoir Hydropower Project.
Budhigandaki Hydropower financing model
The project, straddling the Dhading and Gorkha districts, targets completion within an eight-year timeframe. The foundational cost is set at an estimated $2.77 billion (approximately NRs. 374 billion).
The total cost, including $320 million in interest accrued during construction, will reach NRs. 406 billion. A crucial Debt-to-Equity ratio of 70:30 has been proposed, anchoring the new Budhigandaki Hydropower financing model.
Strategic Ownership and Equity Structure
The project’s promoter, Budhigandaki Company Limited, will maintain a strategic ownership structure. The Government of Nepal will hold an 80% stake. Meanwhile, the Nepal Electricity Authority (NEA) will command the remaining 20% ownership. This dominant government control ensures alignment with national energy security objectives.
The proposal also includes plans to reduce debt burden as the project nears completion. This reduction will occur through issuing shares to the general public based on actual financial indicators.
The government commits a massive NRs. 248 billion to the project. This amount combines NRs. 97.47 billion in equity and NRs. 150 billion in concessional loans. Importantly, the NRs. 45 billion already invested in the project preparation will be converted into company shares.
Innovative Financing and Debt Management
The government will actively absorb the costs associated with Customs Duty and Value Added Tax (VAT) incurred during the construction phase.
A key funding mechanism involves allocating 50% of the existing infrastructure tax collected on petroleum imports directly to the project. This innovative funding stream significantly secures the necessary resources.
The NEA will inject NRs. 24.37 billion as its equity contribution. To further ensure financial viability, the Budhigandaki Hydropower financing model proposes issuing NRs. 30 billion worth of energy bonds.
Banks, financial institutions, insurance, and reinsurance companies, along with public funds, will be eligible buyers for these bonds.
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Furthermore, NRs. 104 billion is expected to be secured through co-financing arrangements with other banking and financial institutions. After accounting for existing investments, approximately NRs. 228 billion in new source security is required.
Energy Output and Economic Impact
Upon commissioning, the project is projected to generate 3.38 billion units of electricity annually. This output includes 1.41 billion units during the dry winter season and 1.97 billion units in the monsoon.
The proposed Purchase Power Agreement (PPA) rates are NRs. 12.40/unit for winter and NRs. 7.10/unit for the monsoon. This tariff structure will generate an estimated annual revenue of NRs. 31.48 billion once the plant operates. The project will hold a generation license for 50 years, expecting around 42 years of active power production.
Project Readiness and Strategic Importance
The Detailed Project Report (DPR) and tender documents are ready. The most challenging aspect—land acquisition—is nearly 90% complete. The project has distributed NRs. 42.65 billion in compensation to date.
Around 8,117 households in Dhading and Gorkha will be affected, with 3,560 families facing complete displacement. Budhigandaki is strategically critical for energy security due to its proximity to major load centers like Kathmandu, Pokhara, and Chitwan.
The construction involves a 263-meter-high curved arch dam on the Budhigandaki River, creating a 63 sq. km reservoir area. This reservoir is expected to stimulate employment, tourism, and fisheries.
Upper Arun Project Follows Suit
In parallel, the 1,063 MW Upper Arun Semi-Reservoir Hydroelectric Project, spearheaded by the NEA, also adopts a similar funding structure. Its estimated cost is $1.75 billion (NRs. 214 billion).
The Upper Arun project applies the identical 70% Debt and 30% Equity model. Founder shares will make up 51% of the equity, with ordinary shares covering the remaining 49%.
Government entities and financial institutions will participate as founders. Expatriate workers, NRNS, and the public will subscribe to the ordinary shares.
The Upper Arun project aims for an annual generation of 4.53 billion units, reinforcing the need for the Budhigandaki Hydropower financing model approach to be replicated. Preparatory work, including access roads, is actively underway.
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