Nepal Hydropower Development Project Quarterly Report Q1 FY 2018

The project's mission is to assist the Government of Nepal in realizing the country's hydropower potential, both domestically and in export markets. NHDP provides transactional and policy support to the Ministry of Energy (MoE) and the Investment Board of Nepal (IBN) to achieve these goals. NHDP's activities during the second quarter of Project Year 3 (Q1 FY 2018) focused on supporting the development of six medium and large hydro power projects (HPPs). Five of these projects are under the control of IBN, while the Upper Trishuli-1 (UT-1) HPP is managed by the MoE. The project also assisted the MoE in developing policies and laws to facilitate sector restructuring, regional electricity trading, and making the Nepal Electricity Regulatory Authority (ERC) operational. During this quarter, Nepal took significant steps to address its chronic energy deficits and provide a framework for sector development. The Government of Nepal (GoN) continued to work on making the Power Trade Agreement (PTA) operational and facilitating regional power trade through the construction of new transmission lines. The MoE also took the lead in giving the new regulator an appropriate legislative and sub-legislative framework and identifying possible commissioners for appointment. On the transactional side, three medium and large HPPs made substantial progress toward financial close (FC). The Arun 3 HPP, managed by IBN, is scheduled to reach FC and begin construction in 2018. The Joint Venture Agreement (JVA) for the West Seti HPP was concluded between the Chinese developer, China Three Gorges International Corporation, and the Nepal Electricity Authority on behalf of the GoN. The Parties, the Nepal Electricity Authority (NEA) and the Korean sponsor, Nepal Water and Electricity Development Company (NWEDC), also made progress on the Upper Trishuli-1 (UT-1) HPP. NHDP's support to the MoE and IBN during this quarter included transactional support for the development of HPPs, policy support for sector restructuring and regional electricity trading, and assistance in making the ERC operational. The project also worked with the MoE to develop policies and laws to facilitate sector development and address the country's chronic energy deficits. The project's progress during this quarter was significant, with substantial progress made toward financial close for three medium and large HPPs. The GoN's efforts to make the PTA operational and facilitate regional power trade through the construction of new transmission lines also contributed to the project's success. NHDP's continued support to the MoE and IBN will be crucial in achieving the project's goals and realizing Nepal's hydropower potential. NHDP's plans and strategies going forward include continued support to the MoE and IBN in the development of HPPs and sector restructuring. The project will also continue to work with the MoE to develop policies and laws to facilitate sector development and address the country's chronic energy deficits. Additionally, NHDP will support the MoE in making the ERC operational and facilitating regional power trade through the construction of new transmission lines. The project's implementation issues, obstacles, and delays during this quarter included challenges in the development of HPPs, particularly in the areas of environmental and social impact assessments and project financing. However, NHDP's continued support to the MoE and IBN will be crucial in addressing these challenges and achieving the project's goals.