Development of a new hydropower plant in Nepal will help to ease the country’s energy shortage and improve its economic prospects, says the Asian Development Bank (ADB).

The ADB has agreed to lend $150 million for the construction of the Tanahu hydropower plant on the Seti River, 150 km west of Kathmandu. The plant will be the first major hydropower plant in Nepal to have water storage, enabling it to generate electricity year-round.

The 140 MW hydropower plant will be fed from a 7.26 sq km reservoir and will also be equipped with a sediment-flushing system to enable it to cope with the sediment-heavy river.

It will be built at a cost of $500 million, with funds also coming from the Japan International Cooperation Agency, the European Investment Bank and the Abu Dhabi Fund for Development.

The ADB has identified Nepal’s power shortages as one of the largest constraints on economic growth. Around 85 per cent of Nepal’s existing hydropower plants are run-of-river plants that have to reduce their output in the dry summer months.

According to the ADB, at least 17 636 homes near the planned plant will be provided with connections to the national power grid.