Budhigandaki Hydropower Investment Modality Officially Approved
20th March 2026, Kathmandu
The Budhigandaki Hydropower investment framework for the massive 1,200 MW reservoir-based project has officially cleared its final administrative hurdle.
Budhigandaki Hydropower Investment Modality
On March 20, 2026 (Chaitra 7, 2082), the Ministry of Energy confirmed that the Cabinet-sanctioned investment modality letter has been received, following a formal endorsement by the Ministry of Finance. This approval signifies the transition of Nepal’s “national pride project” from a decade of planning into the active construction phase. Energy Secretary Chiranjeevi Chatout verified that the ministry is now authorized to move forward with the global tendering process.
The New Investment and Ownership Framework
The approved Budhigandaki Hydropower investment modality establishes a robust financial structure designed to minimize external debt while maximizing domestic equity. The project is estimated to cost a total of NPR 4 kharb 6 arab ($3.1 billion approximately), including interest accrued during the 8-year construction period.
Debt-to-Equity Ratio: The project will follow a 70:30 financing model.
Promoter Shareholding: The government of Nepal will maintain 80% ownership, while the Nepal Electricity Authority (NEA) will hold the remaining 20%.
Government Contribution: The state will provide NPR 2 kharb 48 arab, split between direct equity (NPR 97.47 arab) and a concessional loan (NPR 1 kharb 50 arab).
NEA Contribution: The NEA will inject NPR 24.37 arab in equity.
Diversified Financing: Energy Bonds and Institutional Loans
To ensure liquidity for the Budhigandaki Hydropower investment, the government has introduced a multi-tier loan mobilization strategy. This approach aims to utilize internal Nepali capital rather than relying solely on international donors.
Energy Bonds: A dedicated NPR 30 arab Energy Bond will be issued to domestic banks, insurance companies, and reinsurance firms.
Consortium Lending: Approximately NPR 1 kharb 4 arab will be raised through co-financing with major national institutions, including:
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- Employees Provident Fund (EPF)
- Citizen Investment Trust (CIT)
- Social Security Fund (SSF)
- HIDCL and Nepal Telecom
- Commercial Banks
Current Project Status and Land Acquisition
One of the most significant achievements of the Budhigandaki Hydropower investment plan to date is the near-completion of land management, which often stalls large-scale projects in Nepal.
Compensation Distribution: Over NPR 42 arab has already been distributed to locals in Gorkha and Dhading districts.
Site Readiness: Land acquisition is now 90% complete, allowing the Budhigandaki Hydropower Company to begin infrastructure work without the risk of major local disputes.
Tender Preparation: With the Detailed Project Report (DPR) finalized, the ministry is preparing the final tender documents for the main dam construction and powerhouse installation.
Economic Impact and Energy Security
The Budhigandaki Hydropower investment is expected to transform Nepal’s energy landscape by providing a “storage” solution that can regulate electricity supply during the dry winter months.
Revenue Generation: Once operational, the project is projected to earn NPR 31.48 arab annually from electricity sales.
Peak Power Management: As a reservoir project, it will allow the NEA to store water during the monsoon and generate power during peak hours in winter, reducing the need for electricity imports from India.
Tourism and Irrigation: Beyond power, the massive 263-meter-high dam will create a vast lake, opening opportunities for large-scale tourism, fisheries, and irrigation in the lower plains.
Conclusion
The formal approval of the Budhigandaki Hydropower investment modality marks a historic victory for Nepal’s energy sector. By securing a clear 80:20 ownership split and a domestic-heavy financing plan, the government has ensured that the benefits of this mega-project remain within the country. As the Ministry of Energy moves toward the construction phase, the project stands as a cornerstone of Nepal’s goal to achieve 28,000 MW of total capacity by 2035.
