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ACTIVITY DATA SHEET PROGRAM: Nepal TITLE AND NUMBER: Increased Private Sector Participation in Environmentally and Socially Sustainable Hydropower Development, 367-006 STATUS: New PLANNED FY 2001 OBLIGATION AND FUNDING SOURCE: $2,315,000 DA PROPOSED FY 2002 OBLIGATION AND FUNDING SOURCE: $1,500,000 DA; $1,000,000 ESF INITIAL OBLIGATION: FY 2001    ESTIMATED COMPLETION DATE: FY 2005 Summary: Of Nepal's estimated total hydropower generation potential of 80,000 MW, it is currently technically and economically feasible to develop approximately 45,000 MW. Sound development of Nepal's hydropower potential will meet increasing domestic demand for electricity in the home and for use in agriculture, industry, health, and education. It will also potentially produce clean energy to meet a huge unmet demand for power in neighboring countries. Foreign and domestic private investment in hydropower development will provide greater domestic returns on investment than are currently provided by most other sources, both in terms of capital development and foreign exchange earnings. This objective will support Nepal's efforts to improve the overall policy, legal, and regulatory platform for private sector investment in hydropower projects oriented for either domestic or export markets. The program will also promote greater government and private domestic capacity to assess environmental and social impacts of proposed hydropower projects and greater levels of public participation in these processes. These measures support the U.S. Government's goals of reduced global warming and a sustainable world environment. Hydropower development provides a clean, renewable, and environmentally friendly source of power to an energy-hungry region while promoting U.S. business. At the same time, hydropower development will reduce Nepal's dependence on foreign donors, improve the quality of life in Nepal, and strengthen regional cooperation. Key Results: Anticipated results include improved enabling environment for equitable and sustainable hydropower development, strengthened environmental and social assessment procedures, and broadened stakeholder participation. Performance and Prospects: Since 1992, USAID has played a critical role in improving the enabling environment for private investment in the energy sector. Building on early efforts to strengthen the government's capacity to develop its hydropower resources, USAID launched a three-year, $5 million objective in mid-1998 to encourage private sector participation and investment in environmentally and socially sound hydropower development. As a result of these efforts, USAID has helped stimulate over $300 million in private sector investments in hydropower projects. Incorporating lessons learned from the original objective, e.g., promoting greater transparency, predictability, accountability, and participation in Nepal's energy sector, this objective will support greater foreign and domestic private investment in hydropower development. The program will complement the South Asia Regional Initiative on Energy (SARI/E) to encourage cooperation and eventual trade in clean energy between South Asia countries. Through this objective, USAID will stimulate and leverage both multilateral and bilateral donor efforts to increase capacity in the hydropower sector, and support regional, national, and local initiatives for sustainable development of clean energy. Possible Adjustments to Plans: None. 0ther Donor Programs: USAID has participated substantively in discussions with the World Bank and the Government of Nepal (GON) regarding the Power Development Fund (PDF). USAID will continue to assist the GON in completing the implementation guidelines for the PDF, which along with USAID's objective, will mutually support the development of hydropower in Nepal. The PDF will provide an estimated $175 million in funds-$100 million to leverage private investments at an expected ratio of 3:1, and $75 million to improve Nepal's power transmission and distribution system. The Asian Development Bank has proposed to complement this effort by funding transmission, distribution, and rural electrification schemes. Norway, the United Nations Development Program, Denmark, and Germany are addressing off-grid electrification by implementing microhydro projects. USAID is coordinating with these donors to maximize the impact of its limited funding. Principal Contractors, Grantees, or Agencies: A principal contractor will be selected when funding for the program is available. Other expected partners are the Ministry of Water Resources (Department of Electricity Development), and the United States Energy Association. Selected Performance Measures: Under development as part of USAID's design of this strategic objective. U.S. Financing (In thousands of dollars)   Obligations   Expenditures   Unliquidated   Through September 30, 1999    0 DA 0 DA 0 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 0 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA Fiscal Year 2000 0 DA 0 DA   0 CSD 0 CSD 0 ESF 0 ESF 0 SEED 0 SEED 0 FSA 0 FSA 0 DFA 0 DFA Through September 30, 2000 0 DA 0 DA 0 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 0 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA Prior Year Unobligated Funds 0 DA   0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Planned Fiscal Year 2001 NOA 2,315 DA   0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Total Planned Fiscal Year 2001 2,315 DA   0 CSD 0 ESF 0 SEED 0 FSA 0 DFA       Future Obligations   Est. Total Cost   Proposed Fiscal Year 2002 NOA 1,500 DA 5,000 DA 8,815 DA 0 CSD 0 CSD 0 CSD 1,000 ESF 0 ESF 1,000 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA

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