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News Jan 15, 2015

Shearman & Sterling Advises on Financing for Nepal's Largest Private Hydropower Project

Shearman & Sterling advised Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden NV (FMO), the Dutch development finance institution, as arranger and a consortium of international and Nepalese lenders on the financing for the 82 MW Lower Solu run of the river hydropower project in the Solukhumbu district in Nepal.

The project is the first of its kind, being one of the "super six projects" initiated in 2009 to deal with the electricity crisis in Nepal and will be key to meeting the generation shortfall which currently affects Nepal. By providing access to energy to around three million people, Lower Solu will also have a positive long-term effect on the country's development.

As the first combined domestically and internationally financed IPP in the country, Lower Solu will provide a model for future development. The financing was complex and unique and combined USD loans from development finance institutions in the Netherlands, Germany and Austria, as well as local Nepalese Rupee loans (both direct and guaranteed by GuarantCo), together with a subordinated loan and an additional letter of credit structure to aid with equipment supply payments. The shareholders constitute a combination of local Nepalese companies, together with an Indian company acting as lead sponsor.

The Shearman & Sterling team included London Project Development & Finance partner John Inglis; senior associate Suzanne Szczetnikowicz; associates Josephine Du Sauzay, Amy Crocker-White, and Catherine Kempsey (all London-Project Development & Finance); and trainees Ruba Ameen (London-Project Development & Finance) and Rosie Boyle (London-Antitrust). Specialist dispute resolution advice was given by associates Simon Cohen and Simon Jerrum (both London-Litigation), tax advice by counsel Simon Letherman (London-Tax) and associate Gabriel Ng (London-Tax) and environmental advice by counsel Mehran Massih.

Shearman & Sterling is also advising International Finance Corporation as investor and potential lender on a number of power projects in Nepal, including the Upper Marsyangdi and Upper Karnali Hydropower Projects, both of which are large cross-border export projects; the Kabeli Hydropower Project; and the Upper Trishuli-1 Hydropower Project, which is one of the largest domestic run-of-river hydropower projects expected to be built under a BOOT concession agreement with the Government of Nepal.