Govt to sign $70m loan deal with EIB next week

The government and the European Investment Bank (EIB) are set to sign a loan agreement worth of US$ 70 million that would be used for the development of 140 MW Tanahun Hydroelectric Project.
"The loan agreement will be signed in the first week of the coming month of May," Madhu Kumar Marasini, joint secretary at the Ministry of Finance (MoF), told Republica on Sunday.
The government and the EIB have already completed the loan negotiations that paved the way for signing of the agreement. "We completed negotiations a couple of months ago with EIB for a loan of US$ 70 million," Marasini said.
The EIB, which will be the third donor agency to sign loan agreement for the development of Tanahun Hydroelectric Project after Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA), is offering floating rate loan. Such debt typically uses an index or other base rate for establishing the interest rate for each relevant period.
According to Mahesh Prasad Acharya, project chief of the Tanahun Hydroelectric project, the interest rate will be between 2.5 and 3 percent. "But that will depend solely on how the market will function when we actually borrow the money from the EIB," Acharya said.
The government has already finalized the terms and conditions with the ADB and JICA for loan worth US$ 170 million and US$ 184 million, respectively. The government is taking loan from the EIB for the first time. Similarly, the government is also seeking a loan of around US$ 30 million from the Abu Dhabi Fund for Development (ADFD).
JICA has agreed to provide soft loan at 0.01 percent interest rate with 40 years of maturity period. "The recent developments indicate that we would be able to kick off construction of the project in the near future," Acharya expressed optimism.
The national pride project based in Bayas Municipality in Tanahun district will start power generation from 2020 if the construction starts as planned in 2014. According to officials engaged in the negotiation process, the ADB and JICA both also have taken Tanahun Hydropower Project as a ´prestige project´.