news - Hydropower industry and financiers agree to bring international best practices on sustainability to Nepal

FMO facilitates signing of joint declaration to promote sustainable development of hydropower in Nepal

Last week, the Nepal Bankers’ Association and the Independent Power Producers’ Assocation Nepal (IPPAN) made a public declaration to jointly promote environmental and social standards for the hydro power industry. This is an important step to raise the Environmental and Social (E&S) awareness and practices that are applied to the development of hydro power projects on a sector-wide scale.

Over the next 10 years, Nepal has ambitions to realize 15,000 MW of hydropower projects. Most of this new clean energy is intended for export to Nepal’s neighboring countries India and Bangladesh, and so presents a potentially long term, stable source of income for the country.

Together with 15,000 MW worth of hydro projects, large investments will need to be made in the (cross-border) transmission system of Nepal to export energy to the load centers. Estimated costs for these plans vary between USD 30 and 40 billion. Nepal will largely rely on Foreign Direct Investment (FDI) to cover these costs. FDI however demands Nepal’s hydropower and banking sector to implement best industry practices with regard to E&S standards.

“To reach Nepal’s ‘15,000 MW in 2030’ goal, it is very important to prepare the sector for international requirements and align on best practices in E&S standards. By bringing together the Banker’s Association and IPPAN for the signing of this declaration we intend to support the creation of a level-playing field for all actors in the hydropower sector,” says Linda Broekhuizen, Chief Investment Officer at FMO.

IFC, a member of the World Bank Group, also supports the industry-wide approach to the implementation of good practices. On a policy level, IFC already developed new E&S Risk Management guidelines for the financial sector, and supported the development of new Guidelines for Environmental Impact Assessments (EIA).

Next to the ESG declaration signing, the Power Summit in Nepal provided the opportunity for FMO to organize a workshop for midlevel banking and hydropower staff to learn about the practicalities of E&S in hydropower: e.g. ecological implications and cumulataive impacts, health and safety challenges, consultation and livelihood issues. Additionally, a roundtable with CEOs of the Nepalese banks, the Central Bank and hydropower developers was hosted to discuss the merits of having best and international industry practices implemented in Nepal’s hydropower sector.

"The Environment & Social workshop and CEO Roundtable organised by FMO along the Nepal Power Summit 2019 was extremely contextual and productive for Hydropower sector. With large number of under construction hydropower projects and ambitious target of 15000MW in next 10 years, Nepalese private sector looks forward to such initiatives to develop sound Environment and Social capacity to deliver sustainable projects for cleaner south asian region," says Ashish Garg, General Secretary of Independent Power Producers Association Nepal ( IPPAN). 

Mr. Sunil KC, the Chief Executive Officer of NMB Bank: "NMB with support from its joint venture partner FMO has been leading the way in Environmental & Social Risk Management implementation in Nepal. The Bank has always been adopting the best international practices of responsible banking in its regular business activities that provides a strategic direction to promote sustainable socioeconomic development. The joint Declaration signed between Nepalese Bankers Association (NBA) and Independent Power Producer's Association Nepal( IPPAN) during the Power Summit to implement ESRM is indeed a key milestone for the  Power sector in Nepal. Thanks to FMO and NRB, Central Bank of Nepal for supporting the initiative.  We believe that such an approach will help to attract international investors to meet existing funding  gap to create energy infrastructure and also to achieve long term sustainable growth of both Banking and Hydro power sector in Nepal."

Linda Broekhuizen: “We will continue to assist all the stakeholders in Nepal’s hydropower sector with Capacity Development, training and knowledge exchange and, where possible, we will facilitate joint financings between local banks and FMO for Nepal’s hydropower projects.”