Investment Board Nepal said that it has signed a memorandum of understanding (MoU) with Satluj Jal Vidyut Nigam (SJVN) for developing the $1.3bn Lower Arun Hydroelectric Project in Nepal.

The 679MW hydroelectric project will be built on the tributaries of the Jhelum and Chenab rivers, covering the Sankhuwasabha and Bhojpur districts. Upon its completion, the Lower Arun Hydroelectric Project will produce 3,561 million units of electricity per year.

Investment Board Nepal is a Nepalese government agency that fast tracks economic development in the country. It is chaired by the Nepalese Prime Minister.

In June 2021, a meeting of the Investment Board Nepal had approved the MoU pertaining to the Lower Arun project to be signed with project developer SJVN.

SJVN is a hydroelectric power generation company that is jointly owned by the Indian government and the government of Himachal Pradesh state in India.

The Indian company had won the Lower Arun Hydroelectric Project through competitive bidding, as announced in January 2021.

Investment Board Nepal CEO Sushil Bhatta said: “The signing of this MoU will be proved to be a milestone for business cooperation between Nepal and India.”

As per the Nepalese agency, SJVN has to complete the detailed project study of the hydroelectric project and submit to it the detailed project report for approval within two years from the date of signing the agreement.

Ambassador of India to Nepal Binay Mohan Kwatra said: “The signing of the MoU would pave the way for energy infrastructure development and the overall economic prosperity of Nepal.”

The Lower Arun Hydroelectric Project will be constructed under the build, own, operate and transfer (BOOT) model.

It will not have any reservoir or dam and instead will be a tailrace development of the 900MW Arun-III hydropower plant. The tailrace development means that water re-enters the river for the Lower Arun hydroelectric project.

Like Lower Arun, the Arun-III hydropower project is an Indo-Nepalese collaboration. Arun-III had broken ground in May 2018 and is expected to be commissioned in 2023.