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Nepal, Lower Solu

Delivering 82MW of clean run-of-river hydro power to the people of Nepal

Nepal Lower Solu

Context
Demand for electricity continues to rise rapidly in Nepal, however constrained supply leads to regular power outages, with power cuts lasting up to 16 hours per day.  Despite having more than 40GW of hydro power potential, Nepal has an installed capacity of just 700MW. The mountainous country relies upon expensive fossil fuel imports, which are often unable to reach remote areas, and also imports power directly from India. The majority of rural households are reliant upon firewood, presenting a threat to local forests and to human health when burned indoors. The work of gathering firewood mainly falls to women who, as a result, are less able to participate in the wider economy.

Project
Located in the Solukhumbu District of north-east Nepal, the Lower Solu run-of-river hydro project will deliver 82MW of clean power to the national grid. As the largest private sector plant in Nepal, Lower Solu is expected to deliver sustainable power to 4m people. GuarantCo has developed the project with Essel Clean Solu Hydropower (ECS), a developer sponsored by a consortium of Indian and Nepalese investors. GuarantCo’s local currency credit guarantee of NPR 2.785bn (US$28.2m) for the project was the first of its kind, developing Nepalese financial markets and securing long-term financing from the local private sector. GuarantCo’s support enabled the project to incorporate international best practices and mobilised US$191m in funding from DFIs and regional private sector sources.

Impact
By scaling up Nepal’s power generation capacity by 11%, Lower Solu will substantially improve access to clean power, underpinning social and economic development in the country. It is anticipated that Lower Solu will have a significant demonstration effect for future hydro power projects. By developing local financial markets, co-ordinating local and international debt and involving an international financial guarantor for the first time, the project demonstrates the viability of this innovative approach to financing future infrastructure projects in south and south-east Asia.