The Indian infrastructure company GMR Group has signed an agreement to develop a 309 MW hydropower project in Nepal. After reviewing the bids, the Nepalese committee awarded the Upper Karnali project to the company who offered the highest amount of free energy.

As part of the agreement, Nepal will receive 12 percent free energy, approximately 36 MW, and 27 percent free equity in the project. GMR also agreed to pay the Nepalese government $2,500 US per MW for the project survey and deposit $12,500 US per MW prior to starting construction.

Nepal's remote location has long been a source of power supply problems, especially to rural areas. The nation has experienced daily six-hour power outages, and power outages could last as long as 11 hours in the dry season.

GMR reportedly plans to finish the Upper Karnali project within eight years of breaking ground. No timeline has been announced even as the Nepalese government deals with political fallout from their decision.

The French firm Elysee Frontier also claims its license to develop the Upper Karnali was illegally revoked in 2001 and has threatened to contest the agreement.

The Nepalese government is still conducting negotiations over the 402 MW Arun III hydroelectric project with prospective developers following a committee directive to avoid simultaneously awarding multiple projects to any company.

Both the Upper Karnali and Arun III projects are expected to export power to India when completed.

GMR has sought entry into Nepal's hydropower investment opportunities for several months. In November it agreed to acquire an 80 percent stake in Nepal's Himtal Hydro Power Co, which is working on a 250 MW hydropower project in Upper Marsyangdi.