After years of delay due to  environmental concerns and costs, construction of the $1.04 billion, 900 MW Arun III hydroelectric dam in Nepal is underway.

The Nepal government, which completed about 15 % of project construction since the 1990s, has tapped local contractor Sutlej Jal Vikas Niga (SFVN), Patel Engineering and Om Metals, to perform key contracts.

The Indian government recently approved plans to invest $1.69 billion to build transmission and distribution lines to carry electricity from its Himalayan neighbor for industries in northern India —although no contracts for the power have yet been signed. SJVN will perform transmission work as well.

There are still environmental concerns over the run-of-the river project. “The project can cause serious environmental damage to the downstream areas of the Arun river,” Himanshu Thakkar, coordinator for South Asia Network on Dams, Rivers and People told ENR.

Yet, a revised Environmental Impact Assessment has not been released.

The project, located on Arun River in eastern Nepal, will consist of a 70m high concrete gravity dam and head race tunnel of 11.74 km. The dam will also comprise four underground desilting chambers with a length of 420m, a width of 16m and a height of 24m. It will have an underground power house containing four generating units of 225 MW each on the river’s left bank.

BHEL, an Indian company, has won the contract to supply four vertical turbine units for the powerhouse.

Financing will come from Nepalese and Indian banks.

Anil Keshari Shah, CEO of Nepal-based Nabil Bank said the lending by local banks, rare in large project finance, "will test capability of Nepali banks ... in these types of big projects."