The Asian Infrastructure Investment Bank (AIIB) has agreed to provide financial support for the Upper Trishuli-1 hydropower project in Nepal.

As part of this initiative, the AIIB board of directors approved up to $90m for Upper Trishuli-1, which is AIIB’s first project in the country.

The 216MW hydropower project will be developed on the Trishuli river.

The project is being developed by Nepal Water and Energy Development Company (NWEDC) under a 35-year build-own-operate-transfer model.

Upon completion of the project, the energy generated from the hydro plant will be supplied to the Nepal Electricity Authority under a 30-year power purchase agreement (PPA).

AIIB vice-president and chief investment officer DJ Pandian said: “We recognise that power supply shortages in Nepal have caused significant delays in the restoration of infrastructure and services impacted by the 2015 earthquake.

“By investing in hydropower and encouraging further private sector investment in the country, we will help drive economic growth and poverty alleviation efforts.”

The project objective is to increase the country’s power generation capacity to address acute power shortages.

The project is being built with a $650m investment and will be co-financed with the International Finance Corporation, Asian Development Bank and other institutions.

AIBB has also provided $900,000 for the proposed Tamakoshi V hydroelectric project in Nepal. In addition, $1m has been granted from its project preparation special fund for the proposed power distribution system upgrade and expansion project.