Kimathanka Arun Hydropower Project To Be Developed With Domestic Investment

6th January 2026, Kathmandu

Nepal has marked a historic turning point in its energy infrastructure development with the finalization of a formal investment modality for the Kimathanka Arun Hydropower Project. Located in the geographically significant Bhotkhola Rural Municipality–2 of Sankhuwasabha district, this 454-megawatt semi-reservoir project is set to be constructed entirely through domestic capital. This decision by the Electricity Generation Company Limited (EGCL), a government-owned entity, represents a major strategic shift toward national self-reliance and the reduction of dependency on foreign loans for large-scale energy projects.

Kimathanka Arun Hydropower Project

The project is strategically positioned in the northernmost reach of the Arun River, close to the Nepal-China border. By utilizing domestic resources and expertise, the project is expected to foster national engineering capacity and ensure that the economic benefits of hydropower remain within the country.

Comprehensive Project Cost and Financial Architecture

The financial roadmap for the Kimathanka Arun Hydropower Project is built on a robust and sustainable framework. The total estimated cost of the project is NPR 97.94 billion, a figure that accounts for both direct construction expenses and interest accrued during the construction period. To manage this massive investment, a 70:30 debt-to-equity ratio has been proposed.

Under this financial structure, approximately NPR 68.55 billion will be raised through debt instruments, while NPR 29.38 billion will be mobilized through equity. This balanced approach is designed to ensure that the project is financially viable while maintaining a strong foundation of domestic ownership.

Mobilizing Domestic Loan Financing

One of the most innovative aspects of this project is the plan to mobilize the required NPR 68.55 billion in loans exclusively from domestic financial institutions. The proposed co-financing arrangement involves a consortium of major institutional lenders. These include the Hydroelectricity Investment and Development Company Limited (HIDCL), the Employees Provident Fund (EPF), the Citizen Investment Trust (CIT), and the Social Security Fund (SSF).

In addition to these major funds, insurance companies and various commercial banks are expected to participate in the lending process. This collective effort from the domestic financial sector highlights a growing confidence in the profitability of hydropower and the capability of the local banking system to support multi-billion-rupee infrastructure initiatives.

Inclusive Equity and Shareholding Structure

The equity mobilization plan for the Kimathanka Arun Hydropower Project is designed to be inclusive, ensuring that diverse segments of the population have an opportunity to own a stake in the project. The shareholding structure of the Electricity Generation Company Limited itself is already diversified, with the Government of Nepal holding 30 percent, and entities like the Nepal Electricity Authority (NEA) and Nepal Telecom each holding 10 percent.

The specific equity plan for the project includes the following allocations:

Promoter Institutions: Shares for the founding government and public entities.

• Migrant Workers: A dedicated quota for Nepalis working abroad and non-resident Nepalis.
• Local Residents: Shares specifically for people living in project-affected districts.
• Marginalized Households: A special focus on involving extremely marginalized families.
• General Public: A 29 percent allocation for the wider population of Nepal.

This “People’s Hydropower” model ensures that the wealth generated from natural resources is distributed among the citizens, particularly those directly impacted by the project.

Strategic Oversight and Ministerial Direction

The project has received high-level support from the Ministry of Energy, Water Resources, and Irrigation. Minister Kulman Ghising recently reviewed the investment modality and provided critical directives to accelerate the project. He emphasized that the Electricity Generation Company Limited must move beyond simply holding licenses and enter the active construction phase to ensure its long-term institutional sustainability.

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Minister Ghising instructed the board to finalize the project cost updates and immediately initiate the financial closure process. The government views this internal development model as a blueprint for future large-scale energy projects, proving that Nepal can mobilize its own capital for national development goals.

Preparatory Progress and Site Readiness

Significant groundwork has already been laid at the project site in Sankhuwasabha. To date, approximately NPR 731.4 million has been invested in feasibility studies, detailed engineering designs, and pre-construction activities. Key progress markers include:

Land Acquisition: Land for the project office and staff housing camps has already been acquired.

Compensation Valuation: The valuation process for land required for the dam, reservoir, and powerhouse has been finalized.

Road Access: Infrastructure work is ongoing to ensure the site remains accessible for heavy machinery.

Approximately NPR 450 million has been earmarked for final compensation and resettlement, ensuring that the project moves forward with social responsibility and minimal delay.

Projected Energy Output and Revenue

Once commissioned, the Kimathanka Arun Hydropower Project will be a powerhouse for the national grid. It is projected to generate 2.69 billion units of electricity annually. As a semi-reservoir (or peaking run-of-river) project, it offers the flexibility to provide a steady supply of power even during the dry winter months.

The seasonal production breakdown is estimated as:

• Monsoon Season: 1.8646 billion units.
• Winter Peak Hours: 473.1 million units.
• Winter Off-Peak Hours: 353.3 million units.

Financially, the project is expected to generate an annual revenue of approximately NPR 16.91 billion from electricity sales. This revenue will not only support the repayment of loans but also provide a consistent dividend stream for public and institutional shareholders.

Conclusion

The Kimathanka Arun Hydropower Project is a testament to the maturing energy sector of Nepal. By opting for a 100 percent domestic investment model, the country is taking a bold step toward economic sovereignty. With a clear financial structure, strong institutional support, and advanced pre-construction progress, the project is well on its way to becoming a cornerstone of Nepal’s future energy security and a source of national pride.

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