Reuters News Service
July 7, 2000

Eurorient Investment Group is selected to construct the 402 megawatt (MW) Arun III hydroelectric project.

KATHMANDU – A senior Nepali official said yesterday that an American
company would be allowed to construct a hydroelectric power plant, a
controversial smaller version of which was dumped by the World Bank
five years ago. Bishwanath Sapkota, the top government official at the
Water Resources Ministry, said the U.S.-based Eurorient Investment
Group would construct the 402 megawatt (MW) Arun III hydroelectric
project in the eastern Arun Valley. “It (the U.S. firm) was selected
from among three bidders to develop the project,” he told Reuters.
Other competitors were Canadian firm, ASTQ Holdings Corporation, and
Nepal’s Susasun Power Company (P) Limited. Nepali officials said the
U.S. firm would get a construction licence only after it had provided
financing details for the multi-billion dollar facility and an
agreement with the buyer for the electricity generated from the plant.
The power house is to be set up on the Arun river at a remote valley in
the Sankhuwasabha district of the Himalayan kingdom. In August 1995,
the World Bank withdrew from a consortium of Western donors to fund a
smaller version of the Arun project to generate 201 MW of hydropower,
asking Nepal to develop smaller plants. The bank’s concessionary
lending arm, the International Development Association (IDA), had
earlier proposed lending $175 million for the plant which was planned
as a government project at a cost of about $1.0 billion. Environmental
groups had criticised the scheme saying it would damage some of the
region’s pristine forests and would have required relocation of 155
families. Last year, Nepal invited private investors to develop a
bigger version of the facility. Numerous rivers cascading from the
lofty Himalayas have a combined potential to generate up to 83,000 MW
of hydroelectric power in Nepal. The country uses less than 0.5 percent
of this potential for want of funds and technical knowhow. In 1998,
U.S. energy giant, Enron Corp , withdrew a multi-billion dollar dam
plan on the Karnali river in west Nepal, citing uncertain energy
markets. Australia’s Snowy Mountain Energy Corporation (SMEC) which is
to generate 750 MW power on the Seti river, also in west Nepal, is
looking for potential buyers in neighbouring power hungry India.