IPPAN warns government to not discourage power producers

The power producers today blamed the government for restricting private sector from getting survey licenses, production licenses and power purchase agreement (PPA) for hydropower projects.

Organising a press meet in the Valley today, The Independent Power Producers' Association Nepal (IPPAN) also demanded the government to revert the decision. According to them, a meeting chaired by the chief secretary on September 23 decided not to provide any survey licence to the private power producers. They also blamed the government for taking unilateral decision.

IPPAN also expressed its serious concern over the directive on non-life insurance fee recently endorsed by the Insurance Board. According to IPPAN, these provisions will discourage potential investors in the hydropower sector.

Demanding the government to adopt a flexible policy for the private sector power producers, under an open electricity trade policy, IPPAN president Krishna Prasad Acharya, on the occasion, said that the government should distribute electric stoves at concessional rates to increase electricity consumption, increase the use of electric vehicles and provide cheap electricity to industries.

IPPAN, on the occasion, also urged the government to formulate a cross-border electricity trade policy, expand quality transmission lines to sell and distribute electricity to neighbouring countries and formulate proper policy on transmission billing fees.

Government yet to take 50 per cent ownership of Khimti hydro

The government is preparing for interim arrangements to take control of half ownership of the Khimti Hydropower Project as it has failed to draft necessary law in time.
The Ministry of Energy, Water Resources and Irrigation (MoEWRI) confirmed that the government is preparing to introduce interim arrangements to manage and operate the Khimti Hydropower Project. “The project will not be shut down,” the ministry said adding that the ministry will soon finalise all the details to take 50 per cent ownership of the project.
According to project development agreement (PDA) signed on January 15, 1996, Nepal Electricity Authority (NEA) has to take 50 per cent ownership of the project by July 11 (yesterday) but the government’s delay in drafting the necessary law has made the fate of the 60-megawatt (MW) project uncertain.
But NEA and the Energy Ministry both claimed that they have not been able to do enough homework to sign the agreement to take control of its stake, also due to the outbreak of the coronavirus pandemic.
According to the PDA, from today all procedures related to acquire 50 per cent ownership should have been completed by NEA. “And the project should have been operating through a joint venture,” it reads, adding that the JV will also determine and certify the valuation of the project site, undertake share distribution, and determine new power purchase rate.
Earlier, the ministry had formed a team led by a joint secretary with officials of NEA to facilitate the process but it has not made any progress in forming the joint venture company.
The ministry has however already sent a letter to the promoter, Himal Power Ltd, for an interim management. “Though the agreement has expired the ministry has forwarded a draft memorandum of understanding (MoU) to the promoter to make interim arrangements for the operation of the Khimti hydel plant,” the ministry sources said, adding that they have also asked Himal Power to bear the expenses of the operational cost for the time being, which the government will adjust later. “The ministry is though prepared for the final negotiations with Khimti’s promoters in the process of taking over Khimti, failure of arrival of the concerned officials of the promoter company due to spread of coronavirus worldwide has delayed it.”
Himal Power Ltd – which currently has 100 per cent ownership of the project – has been tasked with developing the project under a 50-year lease contract with the government. According to the Himal Power, Khimti hydel project is generating 350GWh of energy annually, for which NEA is paying around Rs 5 billion. The NEA has been incurring an annual loss of Rs 2 billion while buying power generated by Khimti because of US dollar power purchase agreement (PPA).
NEA had initially signed the PPA with Khimti at 5.2 cents per unit, which was later revised upwards to 5.9 cents. The state power utility is buying electricity at up to Rs 21 per unit from the project as the price of the US dollar has surged massively in the last one decade.

Bangladesh grants LoI to GMR to ink PPR

Bangladesh has granted letter of intent (LoI) to GMR to sign power purchase agreement (PPA) to buy 500 megawatts (MW) of electricity from the 900-MW Upper Karnali Hydro Electric Project (UKHEP), the first Nepal, India and Bangladesh – three country – joint hydel project.
The project head of Upper Karnali Hydro Electric Project KK Sharma confirmed that the LoI has paved the way for the project to ink the financial closure with various banks and financial institutions. “The LoI means that the Bangladeshi government has finalised all necessary legal issues to materialise the plan to buy energy from us,” he said, adding that the Bangladesh government had already – on December 18 – finalised the PPA rate with GMR. “At that time the Cabinet Committee on Public Purchase of Bangladesh had approved power purchase agreement rate to purchase 500 MW of energy generated by the project.”
Bangladesh has confirmed to import 500 MW of electricity through Indian firm GMR at a tariff rate of 7.72 cents (Rs 8.80 IC) per unit for a period of 25 years. The development of the project is going to open doors for the first-ever trilateral power trade, apart from ending suspicions that the project will never materialise.
The company is planning to complete the necessary works for the PPA within the next four months and by the next six months the project will ink the financial closure agreement, Sharma said, adding that the company will be able to sign the PPA in June, if everything goes as planned. “The buying entity will enter into a PPA for the purchase of the electricity at the rate of 7.712 cents per unit for a period of 25 years.”
The company also plans to complete the process of engineering, procurement and construction (EPC) and award the contract to the selected firm by March.
The Upper Karnali Hydro Electric Project will be the first Nepal-based private company to export hydropower to Bangladesh through India according to the trilateral agreement. The project also plans to develop its own transmission line to evacuate the electricity it generates in Nepal. The power generated from the plant will be evacuated through a 400 kV double circuit transmission line up to the interconnection point of Power Grid Corporation of India, in India. The Indian party will get IC 4 paisa per unit as a trading margin for transmitting the power to Bangladesh. The supply of power to Bangladesh from India is expected to become exemplary in terms of regional power trade agreement.
Estimated to cost around $1.5 billion, the company plans to collect 15 per cent of investment through Nepali banks and financial institutions (BFIs). It has already signed initial agreement with Nabil Bank and Nepal Investment Bank, which are interested to lead the debt consortium for the 15 per cent financing. “The project is in talks with the Indian Exim Bank, Chinese Exim Bank, Asian Development Bank (ADB), World Bank (WB) and Netherlands Development Finance Company and other multilateral lenders for the remaining project financing.”
The run-of-the-river hydropower project was awarded to the Indian Group through an international competitive bidding process in 2008 on a build, own, operate and transfer model as an export-oriented project aimed at the Indian market. Nepal will receive 27 per cent free equity and 12 per cent free energy from the project. Nepal will receive 108 MW out of the remaining 400 MW for free, while GMR plans to sell the remainder to the Indian government.
Expected to complete about five years, the project developer has to transfer the full ownership of the project to the Nepal government at the end of the 25-year concession period.

Bangladesh agrees to pay 7.7 cents per unit for Upper Karnali power

Opening the door for the first-ever trilateral power trade, Bangladesh has formalised its pledges to buy electricity from the 900-MW Upper Karnali hydel project, which is being developed by GMR Group. The move paves the way for the financial closure of the 900-MW Upper Karnali Hydro Electric Project.
The cabinet committee on Public Purchase (CCPP) of Bangladesh today gave the green signal to import power at a rate of 7.71 cents per unit – which is equivalent to Rs 8.80 per unit – for a period of 25 years, reported Bangladeshi newspaper Dhaka Tribune.
The energy-hungry Bangladesh will pay out a massive Tk381.60 billion (equivalent to Rs 511.69 billion) over 25 years to procure 500-MW of electricity.
On November 21, Bangladeshi State Minister for Power, Energy and Mineral Resources Nasrul Hamid –speaking at the inaugural ceremony of the seventh Power Summit in Kathmandu – had hinted that they would get the PPA rate endorsed from their cabinet at the earliest.
GMR appointed project head of Upper Karnali in Nepal Kulmeet Sharma confirmed the development.
The tariff rate – a key point in the discussions between Indian developer and Bangladeshi energy officials – is around 2.5 cents less than what GMR Energy had offered to Bangladesh. “It will now help GMR to arrange funds for the construction of the hydel plant because the lender will approve credit only if a market for the electricity to be generated by the project is secured,” he said, adding that now a letter of intent from Bangladesh is expected within 4 to 5 weeks. “After the project receives the letter of intent, it will open the doors to make financing arrangements to build the hydropower project in the western Nepal.”
GMR is accelerating the pace to complete the necessary work for energy trade and working towards the project’s financial closure by 2020, he added.
According to the GMR, it plans to collect 15 per cent of investment through Nepali banks and financial institutions and the initial agreement has been made with them. Nabil Bank and Nepal Investment Bank have shown interest to lead the debt consortium for the 15 per cent financing. “We are also in negotiations with Indian Exim Bank, Chinese Exim Bank, Asian Development Bank (ADB), World Bank (WB) and Netherlands Development Finance Company and other multilateral lenders for the remaining project financing,” Sharma said, adding that the project will be built as per engineering, procurement and construction (EPC) model and the contract will be awarded to the selected firms by March, if everything goes as planned. “GMR has selected three companies for civil, hydromechanical and other infrastructure works and seven companies for electromechanical works through open bidding.”
GMR added that it had signed an MoU with NTPC Vidyut Vyapar Nigam Ltd of India for sale of surplus electricity generated by the project. It is also trying to sign an off-take agreement with Bangladesh Power Development Board.
Nepal will receive 108 MW – out of the remaining 400 MW – free of cost, while GMR plans to sell the rest to the government of the Indian state of Haryana.
Bangladesh Power Development Board and GMR – last year – has signed a principal agreement on the commercial terms of the power purchase agreement (PPA), excluding tariff rates and they were negotiating on the rates since then due to high tariff proposed by the developer.
The export-oriented Upper Karnali hydropower project has a high price tag due to surcharges placed on the use of Nepali and Indian transmission lines. As the developer is required to relay energy using Nepali and Indian infrastructure, it will have to pay wheeling charges to both Nepal and India, and apart from the charges, the loss of electricity in long-distance transmission is also usually high.
Bangladesh signed a memorandum of understanding (MoU) with India’s NVVN to import electricity from the Upper Karnali scheme via India during Bangladeshi Prime Minister Sheikh Hasina’s visit to India in April 2017. As Indian laws don’t allow private developers to export electricity produced in third countries over Indian transmission lines, Bangladesh signed a MoU with the state-owned cross-border electricity trading agency while GMR was a witness.
GMR Energy and the government signed a MoU on construction of the hydel plant in 2008. Modelled to run in full capacity for only three months in a year, cost of the reservoir-type Upper Karnali is estimated to hover around $1.1 billion.

Political patronage encouraging corruption: CIAA

“Political patronage has increased rampant corruption in the local levels,” according to the anti-graft watch dog.
Commission for the Investigation of Abuse of Authority (CIAA) – issuing a report today – revealed that no action against the corrupt due to political patronage has helped increase the corruption. The CIAA has surveyed on 3,000 people of 15 districts in the 7 provinces to find out the root cause of corruption.
“Of the total respondent, some 71.5 per cent opines that non action has increased the corruption, whereas some 37.2 per cent suggests political patronage, and some 36.8 per cent believes that expensive electoral system has led to the corruption,” the survey revealed, adding that corruption starts from the level of programme planning to implementation level.
 Thus, the CIAA has asked the local governments to follow the Public Procurement Act (PPA) to check numerous irregularities, in which they – in collusion with local consumer committees and their officials – are involved in.
“The local governments have not bothered to follow the law and have been disbursing funds to contractors and other stakeholders in a haphazard manner,” the survey report reads, adding that it has been receiving number of complaints from people on various irregularities. “Consumer committees are being provided payments by local authorities in advance even before any work has started.
Consumer committees have been formed, when there the governments could not held local election for almost 20 years. They were supposed to be involved in the development activities in the local level during those years, when there were no local representatives to look at the even regular development activities. After the local elections were held after a gap of 20 years in 2017, it was largely expected that elected representatives will be accountable to the people and governance would improve. But continuation of consumer committees has become the root cause of corruption in the local bodies. Thus, the CIAA has also asked them to take action against the erring consumer committees.
The local bodies have been finalising reports of projects even before the concerned projects have been completed, reads the survey report. On the basis of the survey report the CIAA has directed all the local bodies to follow the proper laws, including the Local Government Operation Act and Public Procurement Act and its directives and guidelines to check irregularities.
The CIAA has received the highest number of complaints about irregularities at the offices related to the Ministry of Federal Affairs and General Administration, which oversees the affairs of the local governments.
“Due to the use of heavy equipment for minor works, which could have been completed by utilising local human resources, the local people are becoming unemployed,” the report also reads, adding that the equipment are also not being leased in a competitive manner. “The local bodies have not bothered to listen to the needs of the people and are not utilising local human and natural resources.”

Electricity regulatory commission introduces tariff guidelines

Nepal Electricity Regulatory Commission (NERC) has introduced the ‘Electricity Customer Tariff Determination Guidelines’ today.
The guideline aims at managing electricity generation, transmission, distribution and trade to balance the demand and supply of electricity for customers, according to the commission that had previously identified some key factors that play a crucial role in determining the tariff to determine the electricity tariff.
The chair of commission Dilli Bahadur Singh informed that the new guidelines will play a vital role to determine the electricity tariff for all kinds of consumers in a scientific manner. According to the guidelines, it will protect customers’ rights and assure quality electricity. “It also paves way for professionalisation of the electricity distribution company and raising its effectiveness,” he said, adding that the new guidelines also state about improvements in distribution system and building a mechanism to strengthen distribution company’s resources for future risks. “The guidelines also have a provision of ensuring respectable rate of returns for the distribution companies.”
The guidelines reads that the commission will determine overall investment in projects, including power purchase agreement (PPA) with independent power producers (IPPs), annual electricity sales and also assess income and expense statement. “The commission will also determine expenses on distribution and transmission lines, interest rate and payments, depreciation, regulatory fee and employee expenses,” it reads, adding that the commission will also determine expected annual income of distribution company. “The guidelines – based on the above mentioned factors – the electricity tariff for customers will be determined.”
The guidelines has also opened the doors for Nepal Electricity Authority (NEA) to introduce new electricity tariff for its customers. “The NEA had proposed commission to raise electricity tariff rate by 15 per cent on average for all types of customers except for dedicated feeder and trunk lines but no decision has been taken yet on it.”
According to the guidelines, before determining electricity tariff, any distribution company will have to submit the related documents to commission along with Rs 25,000 fee and the commission will finalise the electricity tariff within seven days from the application date. “At present, guidelines can only be applied to NEA as it is the country’s sole power utility but in the future if any new power distribution company is established, then it will have to follow the guidelines.”
A few weeks ago, NEA had decided to reduce the tariff rates for dedicated feeder and trunk line users, that is, industries and hospitals. According to the NEA’s decision, from now onwards dedicated feeder and trunk line users will be charged only 15 per cent more than the tariff paid by general consumers. However, the revised tariff will be implemented only if the commission approves NEA’s proposal. Currently, NEA has been charging customers minimum of Rs 4.20 per unit to a maximum of Rs 19 per unit. According to the new guidelines, power trading companies will not be allowed to fix electricity tariff more than once a year.

Nine international lenders to invest $453 million in Upper Trishuli-1

After a long homework of around decade, Nepal Water and Energy Development Company Private Ltd (NWEDC) today signed a foreign direct investment (FDI) agreement with a consortium of nine international lenders agreeing to inject $453 in debt financing for the construction of 216-MW Upper Trishuli-1 (UT-1) Hydropower Project.
Representatives from IFC, Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), Export-Import Bank of Korea (K-EXIM), Korea Development Bank (KDB), CDC Group PLC (CDC), Netherlands Development Finance Company (FMO), PROPARCO Development Financial Institution, and the OPEC Fund for International Development (OFID) signed the financial agreement of $453.2 million – approximately Rs 51.30 billion – for the loan financing of Upper Trishuli-1 Hydropower Project.
Arranged by IFC, the loan agreements were signed to provide a total amount of $453.2 million for the project. “Loans amounting to $161.3 million from IFC, $60 million from ADB, $39.6 million from AIIB, $100 million from K-EXIM, $30.8 million from KDB, $21.9 million from CDC, $15.4 million from FMO, $11 million from PROPARCO, and $13.2 million from OFID have been provided for the project,” according to a press note issued by the Investment Board Nepal (IBN).
Speaking at the agreement signing ceremony, minister for Energy, Water Resources and Irrigation Barshaman Pun said that the project is a game changer as it serves as an example of how the private companies could help Nepal expand its hydropower sector and attract the much needed FDI.
Assuring of the support, assistance, and coordination needed to expedite the process to meet the timeline set by project development agreement (PDA) for the financial closure, he claimed that the project will be an example for foreign investors.
Located in Rasuwa district, the project will generate annual energy of 1,533 gigawatt per hour (GWh) from three power generating units of total installed capacity 216 MW. “Total 38.75 per cent of the annual capacity will be generated in dry season and the remaining 61.25 per cent will be generated in wet season,” according to the press note, which reads that the delivery point of such energy generated is the under-construction Trishuli-3B Hub substation in Nuwakot. The project site is located near the Kathmandu load center and can provide a firm power of 104 MW all round the year.
During the signing ceremony, Prime Minister KP Sharma Oli – in a video message – said that it is one of the largest FDI projects of the country. “The project is important as additional 9 million people will benefit as the project comes into operation,” he said, adding that it will also prove crucial to support the government’s plan to end poverty and foster the economy. “The government urges foreigners to invest in such mega projects wholeheartedly.”
The project includes 29.5-metre high dam in Trishuli River, 9.7 kilometer-long headrace tunnel, 292- metre high vertical pressure tunnel and an underground powerhouse.
Addressing the signing ceremony, finance minister Dr Yuba Raj Khatiwada said that the project is a pilot project for bigger projects. “We are working on creating investment friendly regulations and have been very clear about the PPA policy including PPA in US dollar terms,” he said, adding that land and forest acquisitions have been made very simple to attract the investment.
Upper Trishuli-1 is the first project in South Asia to successfully complete the process of Free Prior Informed Consent (FPIC) from the local people in the project area.
The construction of the project will be done based on a fully wrapped engineering, procurement and construction (EPC) contract. A joint venture of Korean firms — Daelim Industrial Co and Kyeryong Construction Industrial Co — will carry out main construction works of the project that is scheduled to be completed is 5 years.
According to NWEDC, the construction of the project will start after the approval of the
Financing Agreements by the central bank and after the fulfillment of other conditions in the signed Financing Agreement documents. Earlier, the company had seen a funding oversubscription with nine multinational lenders offering a loan of $631 million against the $453 million required in debt finance.
“There is no question that Nepal has the potential to be an energy powerhouse,” chief executive officer of NWEDC Bo-seuk Yi, said, on the occasion. “To realise that promise, Nepal can enlist the help of private companies, which have the capital and expertise to make major projects a reality,” he added.
Likewise, director of infrastructure finance, South Asia, Central Asia, and West Asia at ADB’s Private Sector Operations Department Shantanu Chakraborty said that the agreement is a landmark transaction that will provide strong incentives for further private sector investment in Nepal’s energy sector.
To ensure it provides sustainable benefits, Chakraborty said that this project will adopt international best practices in safeguards management and will also introduce measures to promote gender equality, including job opportunities for women and better access to education, health care, amenities, and infrastructure.
On the occasion, IFC director for South Asia Mengistu Alemayehu said that the project represents a significant milestone in the development of Nepal’s hydropower potential as it has been able to attract meaningful private sector participation, particularly from international investors.
In July, the cabinet decided to extend the tax holiday to the company a few weeks after the anti-dollar alliance – Asian Infrastructure Investment Bank (AIIB) – approved its first $90 million loan to the project, raising eyebrows over the government’s decision to give tax holiday for the company, which has a dollar PPA with the power utility.
The project development agreement of the project was signed on December 29, 2016 while the power purchase agreement between NWEDC and Nepal Electricity Authority (NEA) was signed in January 2018.
When the NEA signed a power purchase agreement with Nepal Water and Energy Development Company a year ago to purchase the electricity generated by the project, the state-owned power utility agreed to pay in US dollars for a period of 10 years or until the portion of the investment made with foreign loans is recovered by the developer, whichever comes first.
After the row over hedge fund, the developer agreed to provide 17 per cent of the energy to the power utility free after 14 years and the government and electricity authority agreed to contribute two-thirds of the amount to the hedge fund.
According to the provisions, the company will be exempted from 100 per cent of income tax for the first 10 years of commercial operation and 50 per cent exemption for an additional five years.

Hydel firms not allowed more than 17 per cent profit

The government has restricted the hydropower developers from taking more than 17 per cent profit but the small power developers no longer need to pay additional fines to the NEA, if the power generation drops due to change in hydrology, according to new bylaws.
According to the bylaw ‘Conditions for People with Licence for Power Purchases and Sales-2019’ issued today by Nepal Electricity Regulatory Commission (NERC), hydropower developers are barred from taking more than 17 per cent return on equity but it has also exempted the hydropower projects – of less than 10 MW – of additional fines in case of generation drop.
“If the profit made by any hydropower project is higher than 17 per cent, it will be managed by reducing the rate agreed upon in the power purchase agreement (PPA),” confirmed chairman of the commission Dilli Bahadur Singh.
The commission will assess the tentative investment, source of money and its interest rate, clearance of loans and interests, ratio of equity and loan, recurrent expenditure, operational expenditure, maintenance costs, revenue and taxes and other service charges, additional capital that will be required, among others, to calculate the return and income before issuing approval to the developers to sign PPA with Nepal Electricity Authority (NEA), the bylaw reads, adding that the developer will need to submit technical and financial aspects of their power project and tentative rates for the final approval of PPA from the regulatory commission. “Before submitting the documents, they will have to hold discussions with NEA for the tentative rates.”
After the commission approves the final power purchase rate, the developer and NEA will sign the final agreement, it adds. “The commission will finalise the PPA rates within 90 days by assessing the projects’ technical and financial aspects but the financial assessment is not required for projects with installed capacity of up to 100 megawatts (MW).”
More than 40 hydropower projects have been waiting to sign the PPA were waiting for the bylaw as the PPA with NEA has been stalled since the last six months due to delay in issuing the bylaws. “The hydel projects will now be able to sign the PPA with NEA,” Singh said, adding that the power developers will, however, have to get a go-ahead from the commission – according to the bylaws – beforehand. “Earlier, the NEA could independently negotiate and determine the power purchase rates with developers.”
Though, not fixed, the NEA had been signing PPA with power developers earlier at around 17 per cent of return on equity. Singh, however, said that the new PPAs will be based on old tariff till the commission comes up with a new tariff rate.
Likewise, small hydropower plants with an installed capacity of less than 10 MW will not be penalised for falling short of production forecasts, the Electricity Regulatory Commission said. “The developers no longer need to pay additional fines to the NEA, if the power generation drops due to change in hydrology,” the bylaws read, adding that they were penalised up to 80 per cent of the deficit electricity, earlier. “Hence, the developers had been expressing strong reservations against the earlier rule and demanding that it be scrapped.”
Last month, the operators of 20 hydel projects with a combined capacity of 69.8 MW urged the government to acquire their projects citing heavy financial stress, besides calling for the removal of the availability declaration system for plants below 10 MW. “The projects are witnessing a 55 per cent fall in the power projections stated in the PPA, and their income has declined in line with the fall in output,” according to the troubled developers.
According to the bylaws, the provisions requiring developers to produce electricity up to a maximum of 70 per cent of the total annual energy output in the dry season will not be implemented for 10-MW schemes. Likewise, the NEA must pay compensation for undelivered energy to small hydel schemes by calculating the amount using a uniform formula for transmission lines, the bylaws reads.
Independent power producers welcomed the move by the Electricity Regulatory Commission.

Government shortlists developer for Nijgadh airport project

The government today shortlisted developers for the construction of three mega projects including Nijgadh International Airport, Lower Arun Hydropower Project and Kathmandu Outer Ring Road Project.
A meeting of the Investment Board Nepal (IBN) chaied by Prime Minister KP Sharma Oli today shortlisted the Swiss company Zurich Airport International AG to develop Nijgadh International Airport Project and decided to seek extensive proposal from it to construct the second international airport in Bara, according to a press note issued by the board.
“Though some seven firms submitted their proposals for for the construction of second international airport, only Zurich Airport International AG is qualified for the project as its LoI matched the eligibility criteria set by the board,” chief executive officer of the board Maha Prasad Adhikari confirmed. “The remaining six companies failed to meet the criteria.”
The other firms including Matrix Enterprises of Nepal, China Airport Construction Group and China State Construction Engineering Company from China, GMR of India, Qatar Airways and Vinci Group of France were disqualified due to lack of eligibility criteria.
Construction modality of the airport project had remained a major conflict between the government, political parties and the private sector. While calling for EoI for the development of the project, the government had sought proposals from interested firms to build the airport project either under the build, own, operate and transfer (BOOT) or public private partnership (PPP) modality.
The estimated cost of the airport project stands at Rs 400 billion ($3.45 billion), according to the board. “The airport will be built in three phases; the first phase will cost $1.21 billion, the second phase $1.12 billion, and the third phase $1.12 billion.
The government had decided to develop Nijgadh International Airport, one of the most ambitious projects, in 1995. But the timeline for the new airport was pushed back on multiple occasions due to financing and legal issues over its environmental impact. The Environmental Impact Assessment (EIA) report approved by the government shows that more than 2.4 million small and large trees will have to be cut down to build the long-awaited modern international airport in Nijgadh that will have a 4,000-metre runway.
The meeting also went through the proposal to construct Lower Arun Hydroelectric Project. According to the board, three firms – SJVN Ltd of India, a joint venture between Nepal’s HIDCL and Power Construction Corporation of China Ltd, and a joint venture between Nepal’s Green Resources Pvt Ltd and Electric Power Development Company (J Power) of Japan – submitted proposal to develop 679-megawatt Lower Arun Hydropower Project that is estimated to cost Rs 670 billion. “All the three proposals on Lower Arun meet the board’s eligibility criteria so ‘the board is preparing to ask them for detailed proposals,” Adhikari said, adding that the board will evaluate their proposals and pick a firm for the development of the public-private partnership project.
The Lower Arun Hydropower Project has been in limbo since 2016, when the government revoked the licence of a Brazilian company, Brass Power. The government had issued the licence to the Brazilian company in 2012. The Brazilian company had even planned to export more than 50 per cent of the energy generated to India but Brass Power did not show interest in developing the project after there was no progress in the power purchase agreement (PPA) with India.
After revoking the licence, the government had kept the project in its basket and was looking for a builder.
Likewise, the board has also received four proposals for the construction of the Kathmandu Outer Ring Road Project, but three proposals did not meet the eligibility criteria. “A Chinese construction company, China Communication Construction Co, has been shortlisted for the development of the Kathmandu Outer Ring Road Project,” the board informed, adding that the 72-kilometer Outer Ring Road will be constructed at a cost of Rs 212.3 billion. “If the detailed proposal, which has yet to be received from the shortlisted Chinese firm, is found satisfactory, then the project will be awarded.”
As per the initial study report in 2008, the cost of construction of the project was expected to hover around Rs 70 billion.
However, since the price of land has skyrocketed in the intervening years, the project construction cost is expected to shoot up. The project was initially proposed 14 years ago in the budget for the fiscal year 2005-06. The initial cost estimate for the project stood at Rs 6 billion.
The much talked Outer Ring Road will be 50 meters wide with eight lanes, cycle tracks, green belts and pavements on both sides along with flyovers at major intersections, according to the board.
“The companies that have been shortlisted for all these projects will submit their detailed proposals and the board will evaluate them,” Adhikari said adding that the contracts will be awarded to those that fulfill all the requirements.
According to the World Bank, Nepal needs to spend 10 per cent to 15 per cent of the gross domestic product (GDP) annually on infrastructure for the next 10 years. To boost investments, the government earlier this year in March had organised Nepal Investment Summit 2019, which saw investment proposals worth about $17.5 billion from both domestic and foreign investors. All the three projects were showcased during the Investment Summit 2019 in March.

NEA to connect all households with electricity by 2022

The government has planned to provide electricity to every household across the country within three years. Nepal Electricity Authority (NEA) is the implementing agency of the government plan of connecting all households across the country in the national grid in line with the government's guidelines.
“The NEA is working according to the plan to supply electricity to all households of the country by 2022," confirmed NEA's managing director Kulman Ghising. By the end of the last fiscal year 2018-19, some 3.91 million household – up by 10 per cent from a fiscal year ago in 2017-18 – across the country, the state power utility claimed, adding that some 78 per cent households are connected to the national electricity grid, if the clients of community organisations and Butwal Power Company (BPC) are also included. “It means that 22 per cent households are still without access to electricity.”
The NEA has supplied electricity from the national grid to Manang, Solukhumbu, Bajhang and Darchula districts in the last fiscal year, Ghising claimed, adding that the NEA is working on connecting Rukum Purba, Kalikot, Bajura, and Jumla districts in the national grid in the current fiscal year. “The NEA has a target to supply electricity to Mugu and Dolpa in two years.”
After electrification of these two districts, Humla district will be our priority," he added.
A total of 7.55 billion units of electricity were available in the national grid in the last fiscal year, according to the data of NEA that has been giving priority to the use of modern technology to improve its operational efficiency, reduce power leakage, and provide quality services to its clients, it claimed.
The NEA also plans to install smart meters and smart grid technology for the automation, Ghising said, adding that the centralised online bill payment system will be expanded. “There are 83 hydropower projects from the private sector with an installed capacity of 560 MW, apart from additional 120 private sector projects that are under construction after achieving financial closures, with a combined installed capacity of 2,613 MW.”
The state power utility has signed power purchase agreements (PPA) with 85 projects for the supply of 1,480 MW in the last fiscal year 2017-18. The NEA has so far signed PPA with 340 independent power producers for the supply of 6,044 MW of electricity.

Asian Infrastructure Investment Bank approves first loan to Nepal

The Asian Infrastructure Investment Bank (AIIB)'s Board of Directors has approved a loan of up to $90 million for a hydropower project in Nepal.
Approving its first loan to Nepal since it was established in 2014, the China-backed institution said Nepal will receive $90 million for the construction of the 216 MW Upper Trishuli 1 hydropower plant in Rasuwa. The 216-megawatt run-of-river hydropower plant will be developed on the Trishuli river under a 35-year build-own-operate-transfer (BOOT) model.
“The AIIB’s investment will provide much-needed, long-term financing for a vital infrastructure project,” said the bank’s director general Dong-ik Lee. “We are confident that our investment will demonstrate the viability of Nepal’s sustainable energy sector to other potential private-sector investors.”
The Upper Trishuli-1 Hydropower Project will increase the country's power generation by almost 20 per cent, helping to reduce acute power shortages in Nepal, according to a statement from the multilateral development bank.
The Asian Infrastructure Investment Bank plans to disburse the pledged amount for the $647.4 million hydel plant from October 2019. The project – to be constructed by a joint venture of Daelim and Kyeryong, and operation and maintenance by Korea South-East Power – is financed with a mix of debt and equity funding. The total debt stands at $453.2 million and is entirely financed by foreign capital with funds from sponsors including International Finance Corporation (IFC), Asian Development Bank (ADB) and others.
According to IFC – a stakeholder and lender to the developer – the plant has a capacity to provide 40 per cent of Nepal’s expected annual output during the dry seasons including the peak winter demand months.
“We recognise that power supply shortages in Nepal have caused significant delays in the restoration of infrastructure and services impacted by the 2015 earthquake,” AIIB vice-president and chief investment officer DJ Pandian said, adding, “By investing in hydropower and encouraging further private sector investment in the country, we will help drive economic growth and poverty alleviation efforts.”
The hydel plant with three units – each churning out 72 MW of electricity – is expected to be commissioned in October 2024, though hydel projects have never been completed in time in Nepal.
The developer and the Energy Ministry signed a project development agreement (PDA) in December 2016. According to the agreement, the sponsors – a Korean consortium, local promoter and IFC – will be responsible for the design, engineering, financing, construction, completion, commissioning, ownership, operation and maintenance and transfer of the project.
The energy generated from the project – being developed by Nepal Water and Energy Development Company (NWEDC) – will be supplied to the Nepal Electricity Authority (NEA). The two parties signed a 30-year power purchase agreement (PPA) in January 2018. The state power utility has agreed to buy the energy under a take-or-pay arrangement.
The NEA – while signing a power purchase agreement (PPA) – also agreed to pay in US dollars for a period of 10 years or until the portion of the investment made with foreign loans is recovered by the developer, whichever comes first. “It will be exposed to a foreign exchange risk of around $300 million, if the exchange rate of the US dollar rises at the rate of 3 per cent annually,” according to the NEA estimation. “And in line with the estimate, the government had asked the developer to contribute $150 million to the fund which it refused to do.”
After the row over the hedge fund, the developer agreed to provide 17 per cent of the energy to the NEA for free after 14 years of commercial operation, if it agrees to absorb the risks for the stipulated time,” the NEA said, adding that unlike dollar billing for power purchased from other projects under the build-own-operate-transfer model, billing for electricity produced by the plant will be done in Nepali currency after 10 years of commercial operation which will result in financial benefit to the NEA whenever the dollar depreciates. “Also, the developer will absorb risks in equity which amounts to $194.2 million,” it said, adding that the NEA and the government will not be exposed to heavy risks, if the company does its financial closing and manage funds in time.
The Cabinet had accepted – just before the Investment Summit in March – the developer’s offer to provide free energy after 14 years of operation and asked the electricity authority to implement the agreement with the amended terms.
“As per the hedge fund agreement, the developer will contribute one-third of the amount and the electricity authority and the government will put up two-thirds of the required fund maintained by Nepal Rastra Bank,” said Prabin Raj Aryal, spokesperson for the Energy Ministry without disclosing the size of the hedge fund.
The electricity generated by the plant will be evacuated to the Upper Trishuli 3B hub over a 10-km 220 kV transmission line connected to the national grid.
Apart from the $90 million loan, the Beijing-based bank has also provided Nepal with $900,000 for the proposed Tamakoshi 5 hydroelectric project and $1 million for a power distribution system upgrade and expansion project from its project preparation special fund. The special fund helps eligible AIIB members to mobilise grants for preparation of various projects.
Nepal is one of the 22 signatory countries that signed a memorandum of understanding to establish the bank in 2014. In January 2016, Nepal was elected to the bank’s board of directors.

India to allow Nepal’s power export to third countries

India committed to allow Nepal to export electricity through its territory to countries like Bangladesh and Myanmar. With India willing to allow transmission of electricity to Bangladesh via its territory, the foreign investors' moral is expected to get a boost. The foreign investors have been expressing concerns about lack of access to foreign markets for energy produced in Nepal.
"Nepal is a hub for hydropower electricity generation and it has great potential to recharge entire South Asia as a battery backup,” secretary of the Central Electricity Regulatory Commission (CERC) of India Sanoj Kumar Jha said, addressing a session 'Energy: Generating 15000 MW Meeting Domestic And Cross Border Demand For Economic Transformation' at the Nepal Investment Summit in Kathmandu today.
"India will provide necessary support to export Nepal’s power to Bangladesh and Myanmar through its territory," the chief of the key regulator of power sector in India said, adding that India also needs more hydropower electricity to diversify its energy mix.
India has set a target of increasing the share of hydropower generated electricity to 40 per cent in its total energy mix as India’s energy portfolio is heavily skewed towards coal-based thermal power. India's hydropower accounts for only 26 per cent of the total energy mix."
Nepal is expected to become energy-surplus nation during wet season once 456-megawatt Upper Tamakoshi Hydropower Project and few others come into operation from next year.
"We are searching for markets in South Asia and beyond to sell the excess power,” said energy minister Barsha Man Pun, on the occasion. "The government is also seeking support of domestic and foreign investors to tap the country’s energy potential, which stands at over 80,000 MW, whereas current installed capacity stands around 1,270 MW only."
He also committed to reform the power sector and make sure that proper policy and legal instruments are in place to harness Nepal’s huge energy potential. "The government is currently formulating an integrated water resources policy, which will guide the overall development of water resource-based projects in Nepal," he said, adding that it has also begun to develop river basin plans and a hydropower development master plan for holistic development of potential energy projects. "The government has put energy in top priority as the sector is the major basis of country's economic transformation."
The government has set a target to produce 15,000-megawatt power within next 10 years and export 5,000 MW, Pun added. "The government has been taking initiatives to bring in foreign investment in big projects."
Urging the foreign investors to invest in hydropower sector of Nepal as it is the important foundation for the development of South Asia he also informed that projects like Dhalkebar-Mujjaffarpur transboundary transmission line have been forwarded.
"Nepal needs to export electricity to fast growing economies like India and Bangladesh,” suggested general manager of Power China Song Dongsheng. "Very soon energy consumption in South Asia will also go up and Nepal’s electricity will play a vital role in meeting the demand," he said, promising that China is ready to provide necessary support to Nepal’s power sector under the one belt one road initiative.
Chief Engineer of Bangladesh Power Development Board Mohabubur Rehman, on the occasion, informed that Bangladesh targeted to import 9,000 MW of power from Nepal by 2040 and that 500 MW was being purchased from the Upper Karnali Hydropower Project.
Power purchase agreement (PPA) with GMR, developer of Upper Karnali Hydropower Project of Nepal. "It is also underway to import 500 MW immediately," according to Rahman. "It is believed that the finalisation of PPA is expected to pave the way for signing financial closure in the project."
Nepal and Bangladesh have also signed an agreement of energy cooperation and also announced a plan to build electricity transmission line via India. Bangladesh has also been seeking Indian support in bilateral and multilateral talks to import energy.
National Planning Commission (NPC) member Dr Krishna Prasad Oli, on the occasion, stressed the need for constructing watershed hydropower projects to reduce impact of climate change. Stating that a bilateral mechanism has been set up for exchange of cooperation among neighbours China, India and Bangladesh, he said efforts were underway to export Nepal's electricity to the regional market.
SAARC Energy Framework Agreement signed in 2014 has laid the foundation of energy cooperation and exchange, which paved the way for further cooperation in energy transfer among the South Asian countries.
Likewise, executive director of the Nepal Electricity Authority (NEA) Kulman Ghising said efforts were afoot to achieve the government's goal to produce 3,000 megawatts electricity in next three years, 5,000 MW in five years and 15,000 MW in 10 years. "Pojects of 16,000 MW are at various phases of construction."
Speakers at the session also highlighted the institutional arrangements and bilateral agreements that the government had made for investors in the energy sector.

Government still claims Melamchhi water will come on time

The government is terminating the contract with the Italian contractor of Melamchhi Water Supply Project – Cooperativa Muratorie Cementisti (CMC) di Ravenna – claiming that the already delayed project will complete on time. As less than five per cent work remains to bring the Melamchi water to Kathmandu, it is still possible to meet the deadline, claimed the project official.
The project has vowed to complete the remaining work of the Melamchi – even by awarding a new contract through a fast-track process – on time. But the cabinet has to decide on awarding the new contract as a special arrangement allowed by the Public Procurement Act (PPA). If the cabinet decides to award the contract for the remaining work to a new contractor, MWSP officials say, they can bring water to Kathmandu by mid-April. However, the Prime Minister has left for Davos yesterday – to take part in rich-nations club – for a week.
There are only five things remain to be done – fitting ventilation shafts in the tunnel, fixing three gates in the tunnel, finishing work in around a 500-meter stretch of the tunnel, some tunnel maintenance work, and construction of temporary coffer dams to divert the water to the tunnel, according to the consultant for the melamchi – EPTISA Engineering Services – has already did an assessment of the project site, evaluated the amount of remaining work and calculated the estimated costs, according to the ministry.
But it will take some more time to complete permanent construction of the dam and also complete the second phase of water treatment plant at Sundarijal. But water can be brought to Kathmandu even without completing the permanent construction works, the ministry claimed.
Secretary of the Ministry of Water Supply Gajendra Thakur today claimed that the Ministry of Water Supply will table a proposal at the cabinet for the purpose immediately after the process to end the contract with CMC di Ravenna is formalised. The Public Procurement Act 2007 has a provision to allow fast-track procurement by the cabinet, but the decision has to be appropriately justified.
The project has today formally started the process to terminate the contract with the CMC di Ravenna, which left the project site over a month ago, after the government did not pay compensation it had asked. The project office has sent a ‘notice of termination’ to the contractor and the notice, according to the procurement law, allows the contractor to correct its course within the 14 days. 
The contract between the project and the contractor – signed in 2013 – for tunnel works and building a dam will be terminated after 14 days, if the contractor fails to turn up at the project site. The project board meeting last Tuesday had decided to wait until Friday for the Italian contractor to return to the project site, which was almost unlikely.
After the termination of the contract, the government will seize all the equipment and construction materials of the Italian firm from the project site. The government will also seize two separate bank guarantees of Rs 1.34 billion and Rs 1.21 billion from Standard Chartered Bank and Nepal Investment Bank. But the Italian contractor owes Rs 1.3 billion to the local sub-contractors and suppliers. The government is claiming that it can pay the local sub-contractors and suppliers from the bank guarantee.

NMB signs PPA to launch unique solar roof-top model

NMB Bank Ltd (NMB) today signed a private power purchase agreement (PPA) with Saral Urja Nepal Private Ltd (SUN) for a 50-kW grid-tie solar roof-top with net metering. The grid-tie solar roof-top will be placed in NMB Bank’s head office in Babarmahal, Kathmandu.
Under the PPA, SUN will install, own and operate the solar roof-top for 15 years. NMB will purchase all the electricity generated from the solar roof-top at a price lower than their retail grid electricity tariff with no up-front investment.
"This initiative reaffirms NMB’s commitment to expanding and financing renewable energy in Nepal," chief executive of the NMB Bank Sunil KC said after signing the agreement. "Not only will part of our own electricity requirements be met through solar, we will also use this to expand financing of solar roof-top solutions across Nepal."
Over the 20 years life of NMB’s solar roof-top system, NMB will pay a lower price per unit from solar than from the grid. The 50-kW will also help to avoid 2 million kWh imports and reduce imports by Rs 20 million over the project’s life.
“We welcome the decision of Nepal Electricity Authority to allow net metering, a system that allows users to connect their solar system to the grid and export the excess electricity to the grid," managing director of Saral Urja Nepal Bishal Thapa said, adding that net metering has opened up tremendous opportunities for Nepal to diversity its generation base, reduce electricity costs to consumer, avoid imports and help build a more reliable electricity grid."
The agreement between NMB Bank and SUN is also intended to expand financing of such solar roof-top systems across Nepal. "The system at NMB Bank is a unique model, where customers can get a solar roof-top system with no upfront investment and pay a rate for solar electricity that is lower than NEA’s tariff," according to chief executive of SUN Aashish Chalise. "We believe that through this system we can achieve 500-MW of solar roof-top within the next 5 years."
NMB and SUN are working towards a financing facility that will enable SUN to offer the solar energy services across Nepal.
“Following this project, we expect to partner with SUN in launching a financing facility to expand the application of solar roof-top across Nepal that will allow customers to save money, diversify Nepal’s generation, reduces electricity imports and create many new jobs,” said chief of Energy & Development Organisation Dinesh Dulal.

Parliamentarians instruct government to construct Budhi Gandaki by itself

Instructing the government to halt the process of allowing China Gezhouba Group Corporation (CGGC) to develop Budhi Gandaki Hydropower Project, the Parliamentarians have asked to construct by itself.
Nearly four months after the government signed a contract agreement for the hydel project with the CGGC, a joint meeting of Agriculture and Water Resources Committee (AWRC) and Finance Committee – under the Legislature Parliament – today has instructed the government to to scrap the Memorandum of Understanding (MoU) to award the 1,200-MW Budhi Gandaki Hydropower Project to the Chinese government undertaking . The MoU was signed in May.
The 1,200-MW project was recently listed as a component of the Belt and Road Initiative (BRI), the China-led plan that envisages greater trade and connectivity and supports varied infrastructure projects.
"The meeting has decided to order the government to scrap the MoU and all the processes of awarding the hydropower project to the Chinese developer and develop it by mobilising internal resources,” chairperson of the Agriculture and Water Resources Committee Mohan Prasad Baral said, adding that the national pride project should be built by mobilising domestic capital and capacity instead of handing it over to a foreign company.
The lawmakers, on the occasion, also flayed the government saying that the project was handed over to the CGGC against the country’s legal premises and breaches the Public Procurement Act. The government has also been criticised for not holding free competition before deciding on the company to undertake the hydroelectricity project.
"This project was handed over to a controversial Chinese company whose track record is so bad in Nepal by flouting various laws like Public Procurement Act," chairperson of the Finance Committee Prakash Jwala said, adding that the government made a blunder by awarding the project to the Chinese firm. "The intention behind selecting this Chinese firm is only to hold the project."
Budhi Gandaki – a reservoir-type mega project that lies in Gorkha and Dhading districts – has been highlighted as a key project to resolve the country’s perennial power crisis.
Kulekhani hydropower projects 1 and 2 – the only reservoir type hydropower plants in the country – having combined capacity of 92 MW are capable of offsetting supply shortage during dry season.
The government-led by Pushpa Kamal Dahal, on May 23, had in principal decided to entrust the work of building the mega project to the CGGC under the engineering, procurement, construction and finance (EPCF) model, though the government led by KP Oli had already completed the home work to award the project to the Chinese developer.
Following the cabinet decision, the then energy minister Janardan Sharma had signed the MoU with president of CGGC Lv Zexiang on June 4 in the presence of then PM Pushpa Kamal Dahal and Chinese ambassador to Nepal Yu Hong. The MoU, however, is silent about project cost. According to the project's DPR prepared by a French consultant, the project is estimated to cost Rs 261 billion.
State Minister for Energy Shambhu Lal Shrestha, on the occasion replying the House committee, said that the country can construct the project with domestic resources.
Though the parliamentary panels have directed the government to scrap the project, they want continuation of land compensation payment. The committees have suggested providing the displaced people a share in the project instead of compensation, for easing the process. The government has listed it as a national pride project. The government has allocated Rs 5.33 billion for project development this fiscal year.

GMR to sell Upper Karnali electricity to Bangladesh

GMR Upper Karnali Hydropower is planning to sign a power purchase agreement (PPA) with the Bangladeshi government.
GMR Upper Karnali Hydropower – a subsidiary of GMR Energy India – is preparing to sign grid connection agreement with Bangladesh Power Development Board (BPDB) and Haryana Power Generation Corporation (HPGC) to sell at least 300 megawatts (MW) to each.
A team from the Bangladeshi government is likely to visit the project site in western Nepal soon and start PPA negotiations with the developer.
"We have already signed the memorandums of understanding (MoUs) with them,” said chief operating officer of Hydro Business of GMR Energy Harvinder Manocha. "After BPDB and HPGC sign power purchase agreement with us, we will be able to obtain loans for financial closure."
The GMR Upper Karnali Hydropower is close to achieving financial closure.
GMR Energy India – the developer of the 900 MW Upper Karnali Hydroelectric Project – will evacuate energy produced by the project to Bangladesh via India.
Bangladesh signed a memorandum of understanding (MoU) with India’s NTPC Vidyut Vyapar Nigam (NVVN) to import electricity from Upper Karnali via India during Bangladeshi Prime Minister Sheikh Hasina’s visit to India in April 2017. "The tariff rate will be mutually finalised by GMR and Bangladesh after negotiations."
According to GMR, as Indian laws don’t allow private developers to export electricity produced in third countries over Indian transmission lines, Bangladesh signed a MoU with the state-owned cross-border electricity trading agency while GMR was the witness. "It is clearly written in the MoU that the energy that NVVN will supply to Bangladesh will come from Upper Karnali."
Manocha said that some international lenders have shown interest to provide loan for GMR’s Upper Karnali project as the developer is gearing up to sign PPA for 600 MW of the energy out of installed capacity of 900 MW. Developer has to achieve financial closure within the deadline of September 18, 2017 given by the Investment Board Nepal (IBN).
"Everything is moving ahead smoothly," he said, adding that the company wants to develop Upper Karnali as a regional project. "It will be a model project for foreign investors willing to come to Nepal."
When the project development agreement (PDA) was signed in September 2014, the cost of the 900-MW project was expected to hover around $1.03 billion. However, the developer believes that cost could escalate to $1.5 billion.
GMR has also shortlisted the bidders for civil and electromechanical works and bidders will be finalised soon. Once the project begins construction, around 5,000 people are expected to get employment opportunity. Nepal will receive 27 per cent free equity and 12 per cent free energy from Upper Karnali project.
Apart from that, Nepali suppliers of construction materials will also stand to benefit, according to the developer that had been given seven years to conclude the construction. The project must be handed over to the government after 25 years from the date of power commissioning, according to the PDA.
Despite all these positive developments, the project is facing a major roadblock from the Ministry of Forest and Soil Conservation as it recently introduced a new guideline ‘Utilisation of Forest Area by National Priority Projects’, which requires ‘land to land’ compensation for the utilisation of land in the forest area.
Earlier, the ministry was willing to provide 5,000 ropanis of government land for nominal lease fees and sought compensation for land area where permanent structures like dam, power house would be built. The developer is going to purchase 1,000 ropanis of private land in Dailekh and Achham districts.
On the other hand, as per the new forest rules, the developer needs to plant 25 saplings in another area of similar topography for chopping every tree for the project and nurture the saplings for five years.
The developer has complained about the recent stringent forest rules to the government. Private sector developers have also been urging the government to respect the PDA as a bilateral document and ensure policy stability for the development of the power sector.

NEA plans six cross-border interconnection corridors

Nepal Electricity Authority (NEA) has identified six cross-border interconnection corridors and 11 transmission lines with 22,000 MW generation capacity added within 2035.
Speaking at an interaction on Transmission Network System of Nepal organised by Energy Development Council (EDC) in Kathmandu today, managing director of NEA Kul Man Ghising said that the power utility has identified and planned six cross-border
Interconnection corridors and 11 transmission lines with a proposed 22,000 MW generation within 2035, as part of its strategy to optimise the energy grid.
Saying that a robust transmission and distribution system is the need of the hour for reliable power supply he informed that NEA was also going to study the requirements and feasibility of major transmission projects such as East-West transmission highway of 400 kV and 765 kV, Mid-hill transmission corridors of 400 and 220 kV, and North-South corridors of 220 and 400 kV.
He, on the occasion, also highlighted the current structure of transmission network in Nepal.
The discussion that featured talks from various stakeholders in the energy sector of Nepal saw officials from NEA and Independent Power Producers (IPPs) brainstorm on an outline on the current power scenario of Nepal.
On the occasion, IPPs also lamented discrimination by NEA while evacuating power. They said that compensation rate is different for different hydropower projects – from 45 per cent to 90 per cent. “Therefore, NEA has to be transparent and equal to power producer companies,” they said, adding that there was a special provision for transmission line for foreign producers but not to domestic producers.
The IPPs also stressed the need for a stable policy and more coherent approach from NEA. Giving an example where the construction of double-circuit instead of single-circuit could have evacuated more energy, they further said that IPP are ready to adopt Build-Own-Operate-Transfer (BOOT) model or even take the responsibility in land acquisition and procurement if allows. “IPPs are ready to adopt any favorable modality and are open to help the NEA to build transmission line,” they said, asking the government power utility to end the discrimination on transmission line construction. "There is a special provision for transmission line for foreign producers but not for national producers and that needs to end," they added
On the occasion, managing director of Liberty Energy Atma Ram Ghimire stressed the need for a stable policy and more coherent approach from NEA. Giving an example, where construction of double circuit instead of a single circuit transmission line could evacuate more energy and avoid duplication, he said that NEA has to synchronise the effort and have better coordination.
NEA has given top priority to install double circuit high capacity transmission network to enhance the quality of power supply.

After Upper Marshyangdi 'A', Sinohydro eyes Upper Kaligandagi

After successfully completing 50-MW Upper Marshyangdi 'A' Hydropower Project, SinoHydro Resources Ltd has set its sights on 65-MW Upper Kali Gandaki Hydropower Project.
Talks for power purchase agreement (PPA) of the Upper Kali Gandaki project, which will be based in Myagdi district, is underway. Environment Impact Assessment (EIA) study of the project has already been completed, according to higher official of the SinoHydro.
The generating license of the project is held by Global Trade Link. It is learnt that SinoHydro will form a joint venture with Global Trade Link to develop the project.
“We are planning to build more hydropower projects in Nepal as the country is rich in water resources,” chairman of the Sino Hydro Resources Ltd – a Chinese government undertaking – Sheng Yuming said.
Sharing his experience in hydropower development, Yuming sad four factors – time, safety, quality and cost – are very important for hydropower projects.
However, the Upper Marshyangdi 'A', which was delayed by 10 months due to last years' earthquake and the economic blockade – has witnessed cost escalation of 8 per cent from the initial estimation of Rs 16 billion. The project went on floor on 2012.
Criticised for delaying the projects like Kulekhani I, the Chinese government undertaking has completed the project with the private sector almost on time.
Comparing the investment scenario in the countries like Pakistan and Lao PDR where SinoHydro has invested in power generation, Yuming said that Nepal is comparatively a safer destination for investment.
Power generated by Upper Marshyangdi 'A' is being connected to national grid on Monday.
SinoHydro Resources owns 90 per cent stakes in SinoHydro-Sagarmatha Power Company, the developer of Upper Marshyangdi 'A'.
Energy minister Janardan Sharma and ambassador of the People's Republic of China to Nepal, Wu Chuntai, are jointly inaugurating the power plant on Monday. The 25-MW will be added to the national grid on Monday and remaining 25-MW will be added in a couple of days, according to the SinoHydro-Sagarmatha Power Company.
Upper Marshyangdi 'A' will be the largest project, in terms of installed capacity, to start generation after the Madhya Marsyangdi (70 MW) which started generation in 2008.
A 20- km transmission line built as per the contingency plan by the developer itself connects the power generated by Upper Marshyangdi 'A' to the substation of Madhya Marsyangdi in Beshisahar of Lamjung.
Upper Marshyangdi 'A' is the first hydropower project built with Chinese foreign direct investment (FDI) and financed by China Exim Bank.

ADB projects 4.8 per cent economic growth, 8.5 per cent inflation

Asian Development Bank (ADB) has projected the economy to grow by 4.8 per cent – due to continued normalisation of trade and supplies, steady remittance inflows, faster pace of post-earthquake reconstruction, modest fiscal stimulus and more normal monsoon – in the current fiscal year. The government has targeted to achieve 6.5 per cent economic growth.
Likewise, the inflation, according to the ADB, will remain at 8.5 per cent, due to better agricultural harvest on the back of normal monsoon, subdued inflation in India, low international fuel and commodity prices, and normalisation of production and supplies since February 2016, which will likely lower general prices of goods and services in the current fiscal year despite the demand-side pressures emanating from the earthquake-related fiscal stimulus.
However, the government – in its budget – and central bank – in the Monetary Policy – has targeted to contain the inflation under 7.5 per cent.
Releasing the Macroeconomic Outlook for 2016-17 today, the multilateral development partner said that the ongoing developments and a cautiously optimistic outlook on reconstruction and political situation is expected to push the GDP growth to 4.8 per cent.
The ADB forecast is, however, lower than the government's target of 6.5 per cent announced in the budget for the current fiscal years. ADB has tried to accommodate the downside risks while calculating the economic forecast.
Agriculture, industry and services outputs are expected to contribute 0.7, 1.0 and 3.0 percentage points, said the ADB country director Kenichi Yokohama, releasing the Outlook.
A downside risk to the forecast is the more than expected damage caused by natural disasters, especially flooding and landslides, to agricultural output; slow rehabilitation and reconstruction works; slow pace of budget execution; and depressed demand in services sector arising from the deceleration of remittance inflows. But the better monsoon and expected pace of reconstruction works – in the current fiscal year – has helped create moderately optimistic scenario, the report reads.
"However, it hinges on the scale of recovery of agricultural output given the normal monsoon, the scope and pace of post-earthquake reconstruction and rehabilitation, budget execution, and remittance inflows,” principal economist at the ADB Sharad Bhandari said, adding that the monsoon rains were above normal and on time unlike in the past few years.
Approximately, 80 per cent of total rainfall occurs between June and September. The Ministry of Agricultural Development has estimated that paddy transplantation has been higher compared to previous years. Paddy transplantation averaged about 95 per cent of 1.4 million hectares of rice field by the first week of August, much higher than 75 per cent in the fiscal year 2014-15.
However, widespread flooding in the Tarai region and the mid-hills, and landslides caused some damage to crops during the last week of July and the first week of August, he added. "The outlook for industrial and services output is contingent upon the evolving political situation, reconstruction work, pace of budget execution, recovery of tourism sector and remittance inflows," said Bhandari.
The scope and pace of reconstruction projects will affect demand for quarrying, manufacturing and construction activities, which largely dictates the trajectory of industrial output.
Timely, effective and judicious budget execution, which includes both accelerated spending and reform measures, will be at the core of industrial and services sector recovery. Similarly, a slowdown in the growth of overseas migrants is bound to affect remittance inflows, which subsequently would affect the major components in the services sector, he said, adding that increasing the quantum and quality capital spending is crucial to building the necessary infrastructure to graduate from Least Development Country (LDC) status to a developing status by 2022, and the long-term goal of becoming a middle income country by 2030.

PPA implementation still challenging
KATHMANDU: Though amended Public Procurement Act (2016) has some desirable features, there remains a gamut of challenges in the procurement process that has delayed the development projects, the Asian Development Bank said today.
Additional penalties – forfeiture of bid security – may not be sufficient to engage good contractors, read a special chapter of the Macroeconomic Outlook for 2016-17 issued by the ADB. "Improved quality of selection is also necessary," it reads, adding, "Additional performance guarantees may not be sufficient to deal with low bids, apart from stringent technical evaluation is necessary."
Likewise, the increase in threshold to Rs 20 million from Rs 6 million for works contracts/tender without requiring bidders' qualification may foster malpractice in the construction industry, it states identifying the challenges. "Thresholds applied to international bidders may violate World Trade Organisation (WTO) rules as well as procedures of multilateral development banks," the report added.
The multilateral donor, however, has praised the amendment for placing clearer authority on chief of the procuring entity for timely and quality procurement and execution of contract; for explicitly recognising e-bidding now and six additional direct procurement methods added, greater delegation of authority to facilitate decisions on cost variations, PPMO's regulatory functions strengthened, greater clarity on different procurement processes for methods such as design and build, turnkey/EPC, public-private partnerships, among others.

Government committed to complete Upper Tamakoshi on time

The government is committed to bring the Upper Tamakoshi hydropower into operation after mid-July 2016.

Asking the developers today to expedite the 456- megawatt Upper Tamakoshi powerhouse construction and land acquisition to build transmission lines as soon as possible secretary at the Office of the Prime Minister and Council of Ministers Krishna Hari Baskota said that the hydropower project is one of the national pride projects. "It should not face any shortages of budget or staff," he said, asking the developers to concentrate on completing construction of pen-stock shaft, powerhouse, transmission lines and sub stations on time.

The hydel project financed by the domestic resources is going to float shares to the public replicating the success of Chilime Hydropower.

After the issue of public share, the share structure of the run-of-the-river project in Dolakha district will be; Nepal Electricity Authority's 41 per cent, Nepal Telecom (six per cent), Citizen Investment Trust (two per cent), Rastriya Beema Sansthan (two per cent), public (15 per cent), locals of Dolakha (10 per cent), and clients of Employees Provident Fund, and employees of Tamakoshi Hydropower Company, NEA and lending institutions (24 per cent).

Rs 35.29 billion project has so far spent Rs 16.29 billion, Baskota informed, adding that works are underway on all four fronts of civil construction, hydromechanical and electromechanical equipment designing and installation, and building of transmission lines and substations. "Around 51 per cent of work on building concrete structure at headworks is complete."

The project has signed Power Purchase Agrement (PPA) with NEA to sell the electricity generated at  a cost of Rs 3.63 during wet season and Rs 6.98 during dry season per unit.