However, the local banking system in Nepal lacked the capacity to extend, without credit support, the 16.5 yr c. USD 30m equivalent local currency debt that the project required in order to align the currency profiles of its revenues and debt obligations. GuarantCo’s credit guarantees, covering 90% of the local banks’ exposures, enabled ECS to raise the required local currency funding and achieve financial close in a timely manner.
The Lower Solu project will add c. 11% to Nepal’s electricity capacity, and will reduce the severe electricity shortage in the country, which sees 12-16 hour daily power cuts in winter months. The project is the largest private sector plant in Nepal, and the first project to have both local and international debt. The project is also the first in Nepal to involve an international financial guarantor and introduces Nepalese banks to long tenor project finance, incorporating international best practices. The project is expected to have a significant demonstration impact for future projects.