news - FMO stimulates green power provision in Nepal

Essel-Clean Solu signs $142.5 million financing for Lower Solu Hydropower project in Nepal

Project will pave the way for other project financed Independent Power Producers in Nepal

London, United Kingdom – 30 December 2014 – Essel Clean Solu Hydropower Private Limited, (‘ECS’) today signed loan financing documents for the financing of the Lower Solu project in the Solukhumbu district in Nepal. The project comprises an 82 MW run-of-river hydroelectric power plant that will provide electricity to an estimated 3 million people and helps to alleviate the current power shortages in the country. It is the largest private sector energy project in Nepal, and the first Independent Power Producer in the country financed by both international and domestic financiers. Also, it is the first project financing involving an independent financial guarantor. The signing of the financing contracts is an important milestone towards the beginning of construction work at the project, which is expected to start March 2015.

• The Lower Solu Project is being developed by a consortium of Nepalese and Indian investors, led by Essel Infraprojects Ltd and Clean Developers Pvt Ltd. • The debt financing is being provided by a consortium of international and Nepalese lenders, led by Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden (FMO). The consortium includes Prime Commercial Bank Ltd (as lead bank for the local debt tranche), DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH, OPEC Fund for International Development, Belgian Investment Company for Developing Countries SA/NV, Triodos Groenfonds N.V., Nepal SBI Bank Ltd, Jalvidhyut Lagani Tatha Bikas Company Ltd, Prabhu Bank Limited and Siddhartha Bank Ltd. 90% of the debt being provided by the Nepalese banks benefits from a credit guarantee from GuarantCo Ltd.

Nepal has one of the largest untapped hydropower resources in the world (estimated at >80,000 MW). Despite its great potential Nepal has one of the world’s lowest electricity consumption rates. Severe power shortage - with power cuts of up to 18 hours a day in the dry season - is a serious bottleneck to sustainable economic growth in the country. Improving access to electricity in a timely and cost-efficient manner is considered one of the most significant development challenges facing Nepal today. As the first combined domestically and internationally financed IPP in the country Lower Solu is paving the way for others to follow.

The investor group was awarded the right to develop the Lower Solu project in a competitive bidding process. With a capacity of 82 MW the project is the largest private sector hydropower project in Nepal. Due to the favourable geographical conditions of the project location the project’s high water head drop of 500 meter is achieved without a large dam or reservoir and with a tunnel of 4.3 km only, resulting in a small footprint and relatively low construction costs for the power generated. Power evacuation is guaranteed by Government of Nepal. The project is forecast to create over 1000 jobs during construction and operations and significant development of the project area.

Chetan Sharma  (President Finance & Strategy of Essel Infraprojects  Ltd ) said:  ‘We are pleased to have our first infrastruture project in Nepal, our closest neighbouring country. The project finance structure is very unique, where for the first time international lenders have joined hands with Nepalese Banks. We look forward for further investments in Nepal.’

Ashish Garg (Executive Director of Clean Developer P Ltd) said: ’This financing is unprecedented and shall benchmark the next era of private sector led hydropower development in Nepal. With majority Nepalese equity, energy for domestic consumption and involvement of such a large team of foreign investors, it is historic for Nepal.’ 

Linda Broekhuizen (Chief Investment Officer of FMO) said: ‘Lower Solu is a unique project that fits well with FMO’s strategy to promote green investments and private sector development in Nepal. The project is first of its kind and a cornerstone of the development of the energy sector in the country. By providing access to energy to around 3 million people, Lower Solu will have a crucial long term development impact.’

OFID welcomed its US$20m in the project. Tareq Alnassar, Head of OFID’s Private Sector and Trade Finance Operations said: “OFID has long-standing and fruitful ties with Nepal, where it has contributed to a wide range of development projects, including energy access.  We are proud to be a partner in the country’s largest private sector hydropower development, which aligns perfectly with our strategic focus on energy poverty alleviation and our commitment to supporting renewable energy solutions.” INFORMATION ON EQUITY SPONSORS

ABOUT ESSEL INFRAPROJECTS Essel Infraprojects Limited is a subsidiary of Essel Group, one of India’s biggest business houses with investments in infrastructure & integrated utilities, media, publishing, packaging, technology enabled services, wellness services and education. Essel Group has been in existence since 1926 through its first venture in commodity trading and exports. Over the years, the group has metamorphosed into a conglomerate and several of its companies are listed. The group operates across the globe with a total employee strength of 12,000 people.

ABOUT CLEAN DEVELOPERS Clean Developers Private Limited is a Nepalese infrastructure company with a primary objective of carrying out various infrastructure development activities. It develops urban infrastructure projects in both residential and commercial segments. With diverse investments, its promoters have interests in cement, foods, packaging, banking, trading and more.

INFORMATION ON LEAD DEBT ARRANGERS:

ABOUT FMO

FMO (the Netherlands Development Finance Company) is the Dutch development bank. FMO supports sustainable private sector growth in developing and emerging markets by investing in ambitious entrepreneurs. FMO believes a strong private sector leads to economic and social development, empowering people to employ their skills and improve their quality of life. FMO focuses on three sectors that have high development impact: financial institutions, energy, and agribusiness, food & water. With an investment portfolio of EUR 6.6 billion, FMO is one of the largest European bilateral private sector development banks.

ABOUT PRIME COMMERCIAL BANK LIMITED (PCBL)

PCBL is ‘A’ category licensed commercial bank in Nepal. It has established itself as an emerging player in financial sector of Nepal and ranks among leading banks. Established by prominent business personnel and professionals from diversified areas, it has the prime objective of providing 'Banking Services to Everyone' and to play a pivotal role in new industries and projects in the country where still large number of population are deprived of Banking Services. Apart from other development projects, PCBL has financed 10 hydropower projects in Nepal, including Lower Solu Hydropower Project, with commitments of USD 38.8 million. The Bank’s shares are listed and actively traded on the Nepal Stock Exchange (NEPSE).

OTHER FINANCIAL INSTITUTIONS PARTICIPATING IN THE DEBT FINANCING:

• Belgian Investment Company for Developing Countries SA/NV, • DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH, • GuarantCo Ltd., • Jalvidhyut Lagani Tatha Bikas Company Limited, • Nepal SBI Bank Ltd., • The OPEC Fund for International Development (OFID) is the development finance institution established by the Member States of OPEC in 1976 as a collective channel of aid to the developing countries. OFID works in cooperation with developing country partners and the international donor community to stimulate economic growth and alleviate poverty in all disadvantaged regions of the world. It does this by providing financing to build essential infrastructure that meets basic needs—such as food, energy, clean water and sanitation, healthcare and education—and works to promote productivity, competitiveness and trade. Energy poverty alleviation is a key strategic goal for OFID, and it is working with its partner countries to prioritize universal access to sustainable energy services. For more information, please visit www.ofid.org • Prabhu Bank Limited, • Siddhartha Bank Limited, • Triodos Groenfonds N.V.

For further enquiries, please contact:

Paul Hartogsveld, FMO’s Senior Marketing & Communications Advisor:  p.hartogsveld@fmo.nl