16.6m euro grant for Mid-Marsyangdi

Kathmandu: The German Development Bank, KfW, has committed an additional 16.6 million euros (Rs 1.56 billion) in grant to the government of Nepal for funding construction of the 70 megawatt Middle Marsyangdi Hydroelectric project.
An agreement to this effect was signed Wednesday by Finance Secretary Bidhyadhar Mallik and Dr Martin Raschen, KfW's Principal Country Manager for Nepal and Bangladesh, according to Arjun Kumar Karki, chief of Nepal Electricity Authority (NEA).

This grant is in addition to the grant of 161 million euros already committed to the project by the German government through KfW.

The additional grant will be used by the government of Nepal for equity participation in the project, whose cost has seen a steep rise from the 2000 base estimate of 149.9 million euros to a January 2007 estimate of 273.4 million euros.

The cost of the project, whose civil works was started in 2001 by German contractor Dywidag-Dragados-CWE Joint Venture, rose owing to changes in design, material cost escalation, and variation claims by the contractor for repeated delays owing to security issues and strikes in the past.

Middle Marsyangdi is the biggest hydropower project currently under construction in the country, and is expected to start generating electricity by 2008 end. It was originally scheduled to be commissioned in 2004. The peaking run-of-river project is located in Lamjung district. The project is being jointly funded by the German government, through KfW, the government of Nepal, and NEA.