Kathmandu - The 669 MW Lower Arun Hydroelectric Project (LAHEP), located in Sankhuwasabha and Bhojpur districts, has finally  entered the construction phase.

Indian public sector company Satluj Jal Vidyut Nigam (SJVN) was awarded the project through international competitive bidding. An MoU between SJVN and the Investment Board Nepal (IBN) was signed in Kathmandu on July 11, 2021.

The project had faced delays despite approval from the Indian Cabinet last year for an investment of Rs 92.67 billion. Progress resumed after Nepal Rastra Bank recently granted approval for foreign currency remittance sought by IBN on behalf of SJVN.

With this clearance, SJVN is set to move ahead with construction based on the Detailed Project Report (DPR) and Environmental Impact Assessment (EIA).

The total cost of the project is estimated at Rs 130 billion.

Designed to operate in tandem with Arun-3 by utilizing its tailrace water, the project is expected to generate about 2,500 gigawatt-hours of electricity annually.

Construction is targeted for completion within five years.

Under the agreement, Nepal will receive 21.9 percent of electricity (around 141 MW) free of cost. The project will follow the build-own-transfer (BOOT) model and will be handed over to the Government of Nepal after 25 years of commercial operation.

SJVN is already constructing the 900 MW Arun-3, expected to be completed within a year, and has also secured approval for the 490 MW Arun-4 project. All three are run-of-the-river schemes.