Rs 70 Billion Tila-2 Hydropower Project Clears Key Financing Hurdle

Kathmandu — The 420 MW Tila-2 Hydropower Project in Karnali Province has crossed one of its most important pre-construction hurdles after securing financing for the Rs 70.07 billion project. The financial arrangement gives promoter Tila Power Company a clearer path to move the long-planned project from preparation to construction.

Under the financing structure, banks and financial institutions will provide Rs 52.55 billion, equivalent to 75 percent of the total project cost, while promoters will inject the remaining Rs 17.52 billion as equity. This translates into a debt-to-equity ratio of roughly 3:1, indicating that the project will rely heavily on bank financing.

Everest Bank is leading the lending consortium, with Sanima Bank serving as co-lead. Prime Commercial Bank, NIC Asia Bank and Global IME Bank are participating as joint lead banks. Siddhartha Bank, Nabil Bank, Nepal Infrastructure Bank, Agricultural Development Bank, Muktinath Bikas Bank and Kamana Sewa Bikas Bank are also part of the financing arrangement.

The participation of 11 banks and financial institutions reflects both the scale of the investment and the need to distribute lending exposure across several institutions. At Rs 70.07 billion, the project represents an investment of about Rs 167 million, or Rs 16.68 crore, for every megawatt of installed capacity.

The project will be developed in Kalikot district, with the dam located in Tilagufa Municipality and the powerhouse in Khandachakra Municipality. Unlike a conventional run-of-river plant that largely follows the natural flow of the river, Tila-2 is designed as a peaking run-of-river project, allowing water to be regulated for electricity generation during periods of higher demand.

This feature is particularly important for Nepal's power system during the dry season, when river flows fall while electricity demand remains high. Tila-2 is expected to generate electricity for up to six hours a day during peak-demand periods in the dry months, giving the project greater system value than its annual generation figure alone suggests.

The project is projected to generate 2,318.79 gigawatt-hours of electricity annually. Based on its 420 MW installed capacity, the projected output implies an annual plant utilisation of around 63 percent. This is a relatively substantial generation level, although actual output will ultimately depend on hydrology, plant availability and operating conditions.

The generation profile, however, also highlights Nepal's continuing seasonal power imbalance. Of the projected annual output, 1,662.29 GWh—or nearly 72 percent—is expected to be generated during the wet season. Dry-season generation accounts for only about 28 percent of the annual total.

Within the dry season, around 451.05 GWh is projected to be produced during peak-demand hours and another 205.45 GWh during off-peak periods. This means dry-season peak generation alone represents about 19.5 percent of total annual production. The project's peaking capability therefore improves the timing of electricity supply, but it does not eliminate the underlying dependence on monsoon-season river flows.

The electricity generated by Tila-2 will be evacuated to the national transmission system. The company aims to complete construction within four years from the start of physical works. Meeting that schedule will depend not only on financing but also on civil construction, transmission connectivity, equipment procurement, environmental compliance and local coordination.

The project had received its generation licence from the Department of Electricity Development on Bhadra 7, 2075. It later signed a power purchase agreement with the Nepal Electricity Authority on Kartik 7, 2081, covering 296.74 MW.

That figure, however, is significantly below the project's total installed capacity of 420 MW. The existing PPA covers about 70.7 percent of installed capacity, leaving around 123.26 MW outside the capacity specified in the agreement cited in the project information. How the remaining capacity will be commercially accommodated is therefore an important issue that is not explained in the available project details.

The project has also set aside 20 percent of its shares for residents of project-affected areas and the general public. Stream Investment, Energy Impact Fund, Robins USS and other institutional and individual investors are listed among the principal promoters.

For Karnali, the project is significant not merely because of its 420 MW capacity. Large-scale hydropower investment can bring construction activity, employment, local revenue and infrastructure development to a region where major private investment has historically remained limited. The actual local economic benefit, however, will depend on how much employment, procurement and supporting infrastructure are retained within the project-affected areas.

Financial closure substantially reduces one of the biggest uncertainties surrounding a capital-intensive hydropower project, but it does not by itself guarantee timely completion. Tila-2 now faces the more difficult phase of converting secured financing into physical progress while managing construction, hydrological, transmission and implementation risks.

If completed according to plan, Tila-2 would add a sizeable block of generation to Nepal's power system while providing up to six hours of dry-season peaking energy. Its real strategic value, therefore, lies not only in the volume of electricity it can generate but also in its ability to supply part of that electricity when the national grid needs it most.