NEA runs into losses for sixth consecutive year

Nepal Electricity Authority (NEA) – running into loses for sixth consecutive years – reported an accumulated loss of Rs 14.31 billion.

Though, the government had written off its Rs 27 billion accumulated loss a fiscal year ago, the authority’s financial health does not seem improving anytime sooner.

The power tariff hike by 20 per cent – to Rs 1.21 per unit – in the last fiscal year was supposed to plug NEA loss but the state-owned power utility recorded a loss of Rs 4.56 billion in the last fiscal year 2012-13, informed the NEA during its 28^th anniversary here today. Its net loss stood at Rs 8.55 billion in the fiscal year 2011-12 and Rs 6.51 billion 2010-11.

Apart from the writing off of the accumulated loss – caused mainly due to Middle Marsangdi’s time run over – the government had also approved the power utility’s Financial Restructuring Plan, which seems inadequate to arrest the loss the NEA is incurring.

The NEA officials, however, claim that they have succeeded in reducing the loss. “The NEA has succeeded in reducing the loss in the last fiscal year by almost 50 per cent compared to a fiscal year,” claimed the executive director of NEA Rameshwor Yadav, addressing the anniversary programme.

The higher production cost compared to the tariff has pushed the Nepal Electricity Authority to loss, he claimed, adding that the authority has, however, been able to collect outstanding dues.

But the NEA that is one of the largest loss making public enterprises (PEs) among the 37 state-run PEs still has to collect around Rs 7.98 billion outstanding dues – that is almost equivalent to sales revenue of 110 days – by end of the last fiscal year, according to the NEA annual report. “Of total receivables, street light dues from different municipalities of the three consecutive years alone amounted to Rs 1.85 billion.”
Though, increased tariff last August has helped electricity sales up but increased operating expenses have eaten up its revenue pushing it to red zone.

The loss is also due to increased power import from India, massive leakages and higher cost of electricity purchase and lower rate of tariff. The NEA purchased Rs 13.49 billion worth power — that is some 53.82 per cent of the total operating expenses and 51.49 per cent of its total income – according to the NEA annual report that revealed Rs 25.07 billion as its total expense in the last fiscal year.

“The high cost of electricity production and leakages, apart from lack of financial transparency pushed the authority to the loss,” according to energy secretary Bishwo Prakash Pandit.

The NEA – that has been in loss since last consecutive six years – data revealed that some 25.03 per cent electricity leakages were recorded in the last fiscal year, though the leakage has come down by 1.34 per cent.

Frequent political bickering, trade unionism, lack of transparency and inefficient management have pushed the state power utility into a deep financially woes hurting the new power projects' development process.
However, NEA has increased its consumer base to 2.59 million by the end of the last fiscal year, the annual report said, adding that household customers are the largest consumers with 95.12 per cent share.

Without mentioning the amount, the annual report also stated that the NEA’s largest expenses went in maintenance and rehabilitation of power stations to increase electricity availability and reliability.

Government to attract FDI for storage type projects

The government is trying to attract foreign direct investment (FDI) in the storage type projects as neither NEA nor the state has enough resources for mega projects, said energy secretary Bishwa Prakash Pandit – one of the NEA board members – during the anniversary programme. “The country needs to attract FDI also to reduce the load-shedding hours,” he said, adding that ministry will encourage large storage type projects attracting FDI. Most of the operating hydropower projects in the country are run-of-the-river type that could not help reduce load-shedding during dry season.