Two commonly cited facts about Nepal stand in uncomfortable tension. On the one hand, Nepal's thousands of rivers cascading down thousands of meters of Himalayan slopes have the potential to generate phenomenal amounts of clean, cheap, renewable hydroelectric power that could, in turn, fuel a vibrant, sustainable industrial and consumer economy, making Nepal the envy of its neighbors far and wide. But, on the other hand, today Nepal's main export in the global economy is human labor: mainly cheap, unskilled, and easily exploitable. Unable to find jobs at home, millions of Nepalis—10 percent or more of the country's population—work in low-wage occupations mainly in India, Southeast Asia, and the Gulf States. As one Nepali expert asked, “Why is there a lack of employment? Because there is lack of industrialization. And why don't we have industrialization? Because we lack necessary power for the purpose” (Shrestha 2011). As such, to say that Nepal is blessed with hydropower resources is something like a cruel joke: instead of exporting power and industrial goods, Nepal exports young men and women.

As any Nepali knows, this situation is hardly new. Nepal's hills and mountains have historically stood as food-deficit, population-surplus zones providing labor to surrounding lowland areas, just like many other poor mountainous regions around the world. Part of Nepal's national identity revolves around its history of foreign-bound lahure mercenary labor (made famous by the British as “Gurkha” troops) and the figure of the brave, bir-bahadur Nepali hill man (Onta 1996).

A century ago, Norway was in a similar position. A cold, mountainous region with a short growing season, little arable land, and few (known) natural resources, Norway was among the poorest countries in Western Europe. But one resource that it did have was snow-fed mountain rivers. By the early twentieth century, tapping those rivers for hydroelectric power was a national priority. Norway began its gradual rise in hydropower production, industrialization, and standard of living. Today, 95 percent of Norway's electricity comes from hydroelectric generation, Norwegians heat their homes mainly with electricity, and have the highest per capita rate of electric vehicle use in the world, while Norwegian companies are global leaders in electromechanical equipment for hydropower generation.

In 2003 the now privatized Butwal Power Company (BPC) set out to retain and expand its leading role in hydel development in Nepal. The company's new joint owners—the Nepali majority investors who made up the Shangri-La Energy Limited (SEL) group and the minority Norwegian investors of Interkraft Nepal (IKN)—were eager to make up for lost time and institute their visions for the new company. Unfortunately, these visions were often not eye to eye. Whereas Odd Hoftun and a number of Nepali professional staff with ties to the old BPC sought to re-establish the company's earlier ethic of corporate reinvestment and national capacity building, the new Nepali majority owners were businesspeople intent on generating profits—not least in order to service debts incurred in buying BPC. Whose vision would prevail became a matter of pointed struggle as IKN tried to assert its rights to management control (legally provisioned in BPC's sales and purchase, and consortium agreements) while the SEL investors claimed their rights (and interests) as majority investors. The structural power fault lines already under strain during the privatization process only increased their friction as the two sides repeatedly rubbed against each other before finally splitting and drifting apart. Over the following decade the collateral damage included a chronically underperforming BPC that saw its leading status ebb away as new independent power producers entered the market, and an increasingly dispirited Hoftun who watched the gradual demise of the development philosophy that had motivated his involvement in BPC for most of his life.

POST-PRIVATIZATION: THE EARLY YEARS

According to the management agreement arrived at earlier between IKN, SEL, and Agder Energi (the Norwegian power company that was to play an advisory role in the now privatized BPC), Agder Energi would make available a “full time expatriate expert to fill the position of BPC General Manager.” This person was expected to train and eventually hand over the position to a Nepali counterpart. The same agreement gave IKN the right to choose a Nepali national for the deputy general manager position with both manager and deputy formally appointed by the BPC board. For years Odd Hoftun had hoped that Balaram Pradhan would accept the general manager post but when he declined, IKN turned to the team of Egil Hagen and Suman Basnet.

Nepal's hydropower sector is one of the country's few development success stories. Nepal has engineering, construction, and manufacturing capabilities that drive a thriving national market in hydropower installation and production. While virtually every other comparable country in the “developing world” relies on foreign expertise and equipment, Nepali companies independently produce everything from simple water-powered grain mills to large-scale hydropower components, and from sophisticated hydraulic modeling services to skilled hydro-engineering and design services. Specialized Nepali construction firms draw on skilled Nepali labor to build large hydroelectric power plants of up to around 100 megawatts (MW) (Karki 2017: 122–123). Nepal has even begun to export these skills, services, and components to other parts of Asia and Africa (R. S. Shrestha et al. 2018: 6). Developments in Nepal's hydropower sector are still well behind those of advanced industrial economies, but they are also well ahead of other “least developed countries.” As a whole, Nepal has no other industrial sector that even comes close to the success of its hydropower industry.

This book examines the history of Nepal's hydropower sector to ask why it is the conspicuous exception to the rule of Nepal's woeful underdevelopment. The answer, I argue, lies in the story of the Butwal Power Company (BPC) and the antiestablishment development logic of its founder Odd Hoftun, a pioneering Norwegian development worker, missionary, and engineer. From the early 1960s onward, Hoftun insisted that Nepalis should develop technical skills needed to thrive in a modernizing society, a view that eventually led Hoftun to promote hydropower development as the means to literally power Nepal's industrial future. Counter to the then (and now) prevailing logic, Hoftun insisted that, to the extent possible, hydroelectric design, construction, and equipment should be locally sourced—even if it was, initially, crude and inefficient. Self-sufficiency and sustainability could only come, Hoftun argued, if every aspect of hydropower development could be done in Nepal, by Nepalis. In the face of ridicule from everyone—from foreign and Nepali peers to big international development agencies—Hoftun started small but, over the course of half a century, worked with Nepalis and other foreigners to establish a technical training institute and, gradually, a family of interlocking companies focused on hydrological design and engineering, equipment manufacturing, deep-mountain tunneling, and project installation.

The 60-megawatt (MW) Khimti hydel project represents a fundamental turning point in the history of hydropower development in Nepal. Whereas almost all of Nepal's previous projects were government and/or grant funded, Khimti was the first to be developed by private investors and the first to involve extensive collaboration between a Nepali company—the Butwal Power Company (BPC)—and international commercial developers. In keeping with the then ascendant neoliberal development philosophy of “unleashing market forces,” and with post-Andolan Nepali governments eager to comply with the wishes of international donors (Gyawali 2003: 77), in the early 1990s Nepal put in place a series of laws that laid the legal foundation on which private-sector commercial power projects could be built. The Khimti project precipitated this new legal context but in so doing opened up Nepal to the gradually building, and now flourishing, market of independent power producers (IPPs) that are today the leading force in Nepal's power sector. Because of BPC's push to develop Khimti, Nepal had established the legal framework for private-sector power development more than a decade before India and other Asian nations. And because of BPC's and its daughter companies accumulated expertise and established human capacity in project development, the stage was set for Nepali manpower to continue to independently develop Nepal's hydropower potential.

But the moment that saw the birth of Nepal's private hydropower development sector was also, in some ways, the end of Odd Hoftun's development vision. At 60 MW, the Khimti project was the logical next step in Hoftun's plans to incrementally grow Nepal's human capacity in the hydropower sector. But a 60 MW project also, for the first time in Hoftun's career, finally surpassed the point at which government or donor grants could finance his undertakings. At this scale, project development would require international commercial financing which, in turn, would put in place a very different set of corporate dynamics.

The Butwal Power Company's (BPC’s) founder, Odd Hoftun, has long thought of his development efforts in Nepal as analogous to planting a seed, tending it with “faith and courage,” and waiting to see how it might mature (Hoftun 2004). From his early days in Nepal, to his establishment of BPC in 1965, through the company's growth and development outlined in this book, Hoftun has watched BPC evolve in ways that are deeply satisfying in terms of his goals of human capacity building and promoting ethical business practices, but also increasingly personally dispiriting. As the seedling matured it increasingly took on qualities required of it by the soil and environment in which it had to grow. Despite his best efforts, Hoftun could only watch as his plant began to bear fruit that diverged from his ideals but reflected the demands of capitalist economics, global and local.

Symbolically, Hoftun's presence in the company also dwindled—from his early decades as general manager, through the disappointing privatization process where his hopes of securing board control for Interkraft Nepal (IKN) were reduced to a tiny 6.9 percent share of the newly privatized company after 2003. Although Hoftun had hoped to play a role in the new BPC, within a few years after privatization IKN's role dwindled to zero. From that point onward IKN could only wait and watch as its annual BPC dividends went to pay off its BPC debts. It took twelve years for the tiny, nonprofit IKN to clear its debts (with interest) before finally, in 2015, selling its BPC shares and severing ties completely. Hoftun had promoted an ethic of corporate nationalism—building hydropower infrastructure to strengthen Nepal's capacity at every level from rural electrification and urban industrialization to skilled manpower, to equipment production and construction skills, to national energy independence. As recently as 2006 Hoftun could write, “I have always looked at BPC as a small bulwark against international money interests”—interests that he saw as not just parasitic but actually predatory to Nepal's own interests. But by the time IKN sold its last BPC shares, the company was largely dancing to the tune of “international money interests.”

Odd Hoftun may have given up his official responsibilities in Nepal when, in 1994, he resigned his post as general manager of Himal Power Limited and retired to a tidy cottage in his wife's home village along the south coast of Norway. But “retirement” proved only to be the next phase of Hoftun's active career. Hoftun simply could not sit and watch the Butwal Power Company (BPC)—that he and so many others had nurtured for decades—sink into oblivion, especially after its nationalization in 1996. Once in government hands, it was as though BPC was placed on a shelf to be exploited occasionally but mainly ignored and allowed to disintegrate. For BPC simply to survive, let alone continue its growth curve along with its allied companies, it needed two things: new work and new management. It needed a new large-scale hydropower construction project to develop, and it needed to be brought under private ownership that would work to further its original mission of human capacity building in the interests of Nepal.

In what was to be the last major campaign of his career, Hoftun—along with others who shared his concerns—set out to accomplish these two goals. They would secure funding for the Melamchi Diversion Scheme (MDS) that would guarantee work for BPC, and they would spearhead a coalition of investors that would purchase BPC and allow them to again exert significant influence at the board level. Broadly speaking, both of these challenges were eventually met: today the Melamchi tunnel is almost completed, twenty-plus years after Hoftun's push, and BPC is a private company in Nepali hands. But neither of these efforts turned out as Hoftun hoped. BPC was eventually elbowed out of the Melamchi project by international contractors supported by so-called development banks. And the privatization process that Hoftun hoped would lead to Norwegian majority control of BPC eventually devolved into a nightmare of bureaucratic obstructionism that finally ended—six years after it began!—with a Nepali ownership whose priorities were often not Hoftun’s.

Once in “retirement”—but now no longer tied in any formal way to the United Mission to Nepal (UMN) and its priorities—Hoftun resumed his place at the chessboard of modern Nepali history attempting to outwit his opponents, channel momentum, and maneuver his pieces into positions of strength.

The Butwal Power Company (BPC) privatization process went through four rounds of bidding. The Nepal government canceled the first two rounds officially on the grounds that the bids were too low. But, as we have seen, there were many other complicating factors including negotiations surrounding the Melamchi project and active obstructionism on the part of the Nepal Electricity Authority (NEA) and the BPC administration itself, both of whom feared that the company's privatization would threaten their authority and even their jobs. Adding to the climate of dysfunction was the general state of chaos that had enveloped Nepal during the People's War when the government was in constant flux and bandhs (public strikes) and bombings became almost routine threats to daily existence.

The third and fourth rounds of bidding turned out to be very different from the first two. Whereas the earlier rounds had seen significant international interest in purchasing BPC, by the last two rounds virtually no foreign bidders remained. A company that had earlier been portrayed as a promising international investment opportunity had, from a Western perspective, turned into a third-world albatross. Ironically, as foreign interest dwindled, Nepali investors stepped into the gap to finance almost the entire bid.

Looking back, perhaps the most astonishing thing about the entire process—beyond the ongoing obstructionism and chaos in which it unfolded—was the sheer determination of the bidders. Both the Interkraft consortium and the Chaudhary Group held out till the bitter end in what looked like a war of attrition, or an ultramarathon that few mortals could have succeeded in finishing. By the time it was over Odd Hoftun was emotionally and physically exhausted and Balaram Pradhan had, literally, worked himself almost to death.

In the weeks following the second bid's cancellation, in January 2000 Hoftun and Pradhan reflected on where they had been and where they were going. Both sensed that even the limited Norwegian public-sector commercial interest that BPC had attracted in the first rounds would not continue into the third. Although it added a great deal of stress to the prospects of financing the remaining bids, in a way this stripping away of foreign commercial involvement was liberating for Hoftun and Pradhan.

Odd Hoftun, a few other expats, and a crew of increasingly skilled Nepali foremen and construction workers built the United Mission to Nepal (UMN) hospital in Tansen between 1958 and 1963. But long before the building was finished Hoftun had already begun laying the groundwork for a new project that would institutionalize the model of skills training, capacity building, and job creation that he had experimented with at Tansen. Already by the early 1960s plans for a UMN-supported trade school were beginning to take shape—a controversial idea for those who thought that missionaries should only be involved in human services like education and health. Recognizing that such a school would require electricity to operate, on the long walks between Pokhara and Tansen (before motorable roads arrived) Hoftun had already identified the Andhi Khola Valley as a promising building site because of the area's power-generating potential. But when he approached the Ministry of Industry for permission to start a training institute, the minister in charge (himself from the Tarai) requested that the school be located in Butwal, then a small, dusty bazaar town at the foot of the mountains below Tansen. The Tinau River that tumbled down a steep, narrow, rocky gorge just above Butwal was not ideal but had some hydropower potential. A poor road linked Butwal with the Indian border, and footpaths led into the hills to Tansen, Pokhara, and all the way to Tibet. But a proposed East–West Highway on the Tarai would, someday, make Butwal a crossroads. For UMN this foray into industrial training and development was a completely new departure in mission activity but, in spite of some resistance, Hoftun was given the go-ahead.

UMN signed a formal agreement with the government of Nepal on November 7, 1963, according to which UMN would build, staff, and manage an “Institute of Technology and Industrial Development” (ITID) and the government would deed a large parcel of land—about 4 hectares of level ground along the main north–south road, with further land for living quarters extending up into the adjacent hills. Popular usage soon shortened the name to “Butwal Technical Institute” (BTI).

While the Andhi Khola project is a veritable model of successful community-based hydropower development, the Butwal Power Company's (BPC’s) next project—on the Jhimruk Khola in Pyuthan District—was a much more ambiguous achievement. Andhi Khola received international recognition for its technical and social innovations even while it generated power for a remarkably low price in terms of initial investment. The Jhimruk project too admirably succeeded in achieving its technical goals of boosting levels of professionalism for BPC and its collaborating companies while building a high-quality power plant on time and within budget. But whereas the Andhi Khola project had carefully worked to cultivate good relations with the local community and integrate community goals and concerns into the larger project from start to finish, at Jhimruk community relations started off on the wrong foot and deteriorated from there. While development experts now often point to Andhi Khola as an exemplary case study, the Jhimruk project is more likely to serve as the opposite—an example of what can go wrong without careful consideration of local conditions—both social and environmental. Even now, more than two decades after its commissioning, the Jhimruk project is the target of local hostility and mired in political controversy (Kunwar 2016), as well as unforeseen environmental problems.

At the root of this contrast between Andhi Khola and Jhimruk is the fundamental difference in how the projects were conceived and implemented. Whereas Odd Hoftun and the United Mission to Nepal (UMN) had initiated Andhi Khola (like Tinau before it) as part of Hoftun's larger vision of promoting industrial development through hydropower and skilled Nepali labor, Jhimruk was a commissioned project taken on by BPC at the request of the Nepal government. Because BPC was officially just fulfilling a government contract, they expected that the government itself would assume full responsibility for the finished project. Rather than laying the groundwork for a long-term relationship with the community as they had done at Andhi Khola, at Jhimruk BPC saw its role as almost entirely technical: it would deliver a product (a power plant) to a consumer (the Nepal government) and then walk away.

Thoughts of a hydropower plant near the tiny village of Galyang on the trail (later road) between Tansen and Pokhara had been percolating in Odd Hoftun's mind for literally decades before planning for the Andhi Khola project began in earnest in the late 1970s. Standing on the ridge at Galyang bazaar in 1959, Hoftun noted how close the Andhi Khola, flowing on one side of the ridge, was to the Kaligandaki River, flowing on the other side. A tributary of the Kaligandaki, the Andhi Khola's riverbed was considerably higher than the Kaligandaki’s: a tunnel bringing water through the relatively narrow ridge would have hydropower-generating potential. In 1966 Hoftun asked the United Mission to Nepal (UMN) surveyor who had mapped the Tinau River valley in preparation for construction there to take some basic measurements around Galyang. He found that the two riverbeds were a little less than 2 kilometers apart with an elevation difference of about 250 meters. Some quick calculations suggested that the site had about 5 megawatts (MW) of hydropower-generating potential, about five times the amount available at the Tinau site. Located about halfway between Pokhara and Butwal, a power plant at Galyang would improve the conditions for industrialization in both cities. And, as the Tinau project progressed through the late 1960s and 1970s, Hoftun increasingly saw a new Andhi Khola project as something that would build on and advance the tunneling and construction experience being gained at Tinau (and, in 1978, consolidated in the creation of Himal Hydro) as well as further expanding hydropower engineering and production capacities at the Butwal Technical Institute (BTI), its Development and Consulting Services (DCS), and, eventually, the Butwal Engineering Works (BEW). For Andhi Khola, Hoftun explained, “the intention was to earn a profit and to finance the next project or growth of other desirable things like setting up the daughter companies.”

In conversations with me, Hoftun made it clear that by the mid-1970s he had started to develop a long-term vision for hydropower development in Nepal. Exactly where and how it would develop was anyone's guess but Hoftun saw how incremental capacity building could create an independent hydropower development sector that would allow Nepal and Nepalis to tap into their country's vast hydropower potential.