Financial Closure Achieved for 63MW Chhujung Khola Project Amid Strong Viability Indicators

Defying the recent climate-induced uncertainties in Nepal’s energy sector, Shangrila Urja Limited has successfully secured financial closure for its 63-megawatt Chhujung Khola Hydropower Project in Sankhuwasabha. A consortium of six financial institutions, led by Machhapuchchhre Bank, formalized a syndicated loan agreement to inject NPR 9 billion into the project. The remaining NPR 3 billion of the NPR 12 billion total estimated cost will be raised through equity, anchored by a significant NPR 1.10 billion investment from Ghalemdi Hydro Limited. Prabhu Bank and Lumbini Bikas Bank have stepped in as co-leads, supported by Muktinath Bikas, NIC Asia, and Shangrila Development Bank. This robust financial backing marks a critical milestone, ensuring that full-scale construction can proceed without liquidity bottlenecks.

From an economic and engineering perspective, the Chhujung Khola project stands out as an exceptionally cost-effective venture. At a time when average hydropower construction costs in Nepal routinely exceed NPR 200 million per megawatt, this project is projected to be completed at just NPR 190 million per megawatt. This capital efficiency is largely driven by its topographical advantage. Utilizing a massive water head of over 900 meters, the project requires significantly smaller civil structures to generate high outputs. Furthermore, as a Peaking Run-of-the-River (PROR) facility, it is designed to operate at full capacity for four hours daily during the dry season, guaranteeing premium tariffs from the Nepal Electricity Authority (NEA) under an already finalized Power Purchase Agreement (PPA).

The project’s financial metrics indicate a highly lucrative return for investors, which explains the strong banking confidence. Financial modeling projects an Internal Rate of Return (IRR) of 15.47 percent and a Return on Equity (ROE) of 25.67 percent. With a Net Present Value (NPV) calculated at NPR 5.33 billion and a rapid payback period of roughly 5.7 years, the project is structured to yield high dividends early in its lifecycle. Upon generating its targeted 371.8 million units of energy annually, revenue is expected to hit NPR 2.27 billion in the first year alone, scaling up to NPR 2.84 billion by the ninth year, aided by the NEA’s 3 percent annual tariff escalation.

Importantly, developers have integrated robust climate resilience and risk mitigation strategies into the project's design. Following the devastating floods in the Bhotekoshi and other river corridors, safety has become a paramount concern for investors. Chhujung Khola circumvents these vulnerabilities by placing its main structures 45 meters above the river's surface and utilizing an underground powerhouse. Additionally, with over 59 percent of its catchment area located above 3,000 meters, the project benefits from consistent snowmelt, ensuring reliable hydrological flow with minimal sedimentation and negligible avalanche risks even during the dry winter months.

Logistical and infrastructural hurdles are currently being tackled with aggressive measures. Due to the extreme remoteness of the Yak Kharka site, developers are airlifting construction materials via helicopter, while simultaneously completing a 14-kilometer access road and necessary camp facilities. On the environmental front, the company has cleared its regulatory obligations by depositing NPR 36.3 million with the Department of Forests and Soil Conservation to plant ten trees for every single tree felled.

To evacuate the generated power, Shangrila Urja is pioneering a collaborative infrastructure model. The company will construct a 55-kilometer, 220 kV double-circuit transmission line to the NEA’s Shitalpati substation in partnership with other developers operating in the river corridor. This cost-sharing mechanism will further optimize project expenditures. Building on the momentum of this 63MW venture, Shangrila Urja is already laying the groundwork for broader national energy security, having initiated feasibility studies for a massive 171-megawatt storage-type hydropower project in the Chhimdi Kawadi Khola of Bajura district.