Nepal UK
Photo: Nepal Times
After more than a decade of missed deadlines, court challenges and shareholding changes, the Investment Board Nepal has agreed to help the developer of the 900MW Upper Karnali hydropower project start construction. The decision was reported in the Nepali press from 16 October; the board's formal letter to the developer had not been sent as of 19 October.
The board, at its 68th meeting, agreed to facilitate an immediate start to construction under the Project Development Agreement (PDA). The developer, India's GMR Group, has said it will proceed once it receives the board's letter. An official told the press that the developer must complete construction within five years. The exact date of the board meeting has not been verified.
The project, in western Nepal, began as a 2008 agreement for a 300MW plant, and GMR applied in December 2009 to raise capacity to 900MW. The PDA was signed on 19 September 2014 and gave GMR two years to reach financial closure, the point at which funding is secured. Extensions followed in 2016 and 2017, and a further two-year extension approved by the cabinet in July 2022 was blocked by a Supreme Court interim order in November 2022.
In May 2023 a Constitutional Bench barred further deadline extensions but granted 186 additional days to compensate for time lost under that order. The cabinet later extended the deadline to 17 January 2025. In December 2024 advocate Dan Bahadur Budha filed a writ arguing that GMR had missed the deadline and transferred shares to Indian investors without approval. The court dismissed the petition; its full verdict said the shareholding change did not appear to warrant adverse action because it fitted the PDA.
Under a revised structure approved at the board's 60th meeting, GMR holds 34 per cent, Satluj Jal Vidyut Nigam (SJVN), an Indian state-owned company, holds 34 per cent, the Indian Renewable Energy Development Agency (IREDA) holds 5 per cent, and the Nepal Electricity Authority (NEA) holds 27 per cent. GMR previously held 73 per cent.
On 15 January 2025 GMR submitted financial closure documents claiming a positive response from IREDA on a loan of INR 65 billion (Rs 103.94 billion) and in-principle approval from a consortium of Nepali banks for a Rs 20 billion loan. An expert committee formed by the board said closure could be reached before the end of February 2025. These are the developer's claims as recorded in the board process; this article has not verified that loans have been signed.
Three questions stand out. First, the formal letter: until it is issued, the construction clock is not visibly running. Second, financing: the public record reviewed here shows claims of support, not confirmed loan agreements. Third, power sales: no buyer arrangements were reviewed for this article.
If built, the project would be one of the largest energy investments in Nepal's history, and the NEA's 27 per cent stake gives the public sector a direct interest. For Nepalese professionals and investors abroad, it is a test of whether Nepal can turn long-delayed energy projects into construction. The Supreme Court's refusal to allow indefinite extensions, and its view that ten years was sufficient, suggest legal tolerance for further delay is limited.
