The government has opened the floodgates to investment in hydropower generation with the recent approval of seven private companies to build medium-sized schemes worth more than US$2.6 billion. EurOrient bagged the prize: the 402 MW Arun III which was expected to cost US$ 859 million in 1995. Other projects are:

Budi Ganga, 20MW ($50.6 m in 1995) Cement Coordination and Planning Cell (India\'s Birla)
Likhu Khola-4, 51 MW ($75.5in 1998) Pacific Hydro Limited (Australia)
Tamor-Mewa, 101 MW ($159m and $ 33m in 1998) US Combined Energy Companies
Dudh Kosi 301 MW ($690m in 1998) ASTQ Holdings (Canada)
Kankai 60MW ($285m in 1984) Coyne Et Belter (France) Andhi Khola 176 MW ($463m in 1997) Nepali joint venture with EurOrient

"The companies may now apply for construction licenses if they have firm Power Purchase Agreements and finances," said Angira Acharya, a senior engineer at the EDC. They would also need approved Environmental Impact Assessments and pay Rs100 per kilowatt of installed capacity as "performance guarantee" to obtain construction permission. Nepal began licensing private hydro projects in 1996. Khimti 1, the first private venture, is already selling power to NEA. Khimti\'s owner Himal Power Limited has an agreement to sell 350GWh of energy each year for 20 years. It sells at US 5.09 cents (1995), which is pegged to the US Consumer Price Index for adjustments.

The 36MW ($98m) Bhote Kosi project-promoted by Nepal\'s Himal International Power Corporation and subsidiaries of two US companies, the Dallas-based Panda Energy International, Inc. and Chicago\'s Harza Engineering Company International LP-is expected to come on line later this year. Under a 1993 law the 50-year BOOT contracts come with 15-year income tax holiday, one-percent import duty on equipment, machinery and parts and exemption of sales tax and license fees. The royalty is fixed at Rs. 100 ($1.47) per kilowatt of installed capacity per year and two percent of energy sales for the first 15 years. The royalty increases to 10 percent on energy sales and Rs. 1000 ($14.7) per kW of installed capacity per year thereafter. The fees and royalty structure could change when the government finalises its new hydropower policy and a new law to go with it. From the 10th draft it is evident that both royalties and fees will be higher for export projects. The tax plan may also change, according to sources.