Austria to invest in two hydropower projects

Austria has expressed interest in assisting Nepal technically and financially to construct two projects – 635-megawatt (MW) Dudh Koshi Storage Hydroelectric Project and 100-MW Tamakoshi V project – with a total installed capacity of 735-MW.
During the first Energy Mechanism meeting between Nepal and Austria today, joint secretary at the Ministry of Energy, Water Resources and Irrigation Prabin Aryal and adviser of the deputy minister for transport, innovation and technology of Austria Sonja Steeler signed the agreement, on behalf of their respective governments.
Austrian officials are also keen on working together to build the Dudh Koshi and Tamakoshi V projects and help enhance the technical capacity of the Nepal Electricity Authority (NEA), according to the Ministry.
The Energy Mechanism meeting is held in Kathmandu today, five months after the energy ministers of the two countries signed an accord on technological assistance in hydroelectric infrastructure in Vienna in May. Earlier, Nepal and Austria had signed a cooperation agreement on infrastructure and technology in Austria on May 22. At that time, both the governments had agreed to invest in Nepal’s transportation and hydropower sectors.
Currently, detailed project report (DPR) preparation of Dudhkoshi reservoir project’s is underway while the DPR of Tamakoshi V has already been completed and its construction work is expected to begin soon, according to the Ministry that expects an exchange of technology and experience through the joint mechanism. Austria is the first European country to sign a deal with Nepal on assisting the energy sector.
The social impact of the Dudh Koshi project is expected to be less as only 162 households will be severely impacted, while 1,150 households – located along the border of Okhaldhunga and Khotang districts – will be partially affected, according to the Environmental Impact Assessment (EIA) report that also added that Nepal Electricity Authority (NEA) is collecting necessary suggestions from local levels, affected municipalities/rural municipalities, forest users groups, various organisations, political parties and locals for the EIA report.
The Dudhkoshi project will be spread over an area of 19.8-sq-km in Khotang and Okhaldhunga districts. Likewise, the reservoir dam will be spread across 17-km in Dudhkoshi, 8-km in Rawa Khola and 5.5-km in Thotne Khola.
A joint venture between Italy and Japan – ELC Electro Consult of Italy and NEWJWC Inc of Japan – has been carrying out the DPR of the reservoir project.
The NEA, which plans to build the plant through a subsidiary company, expects the design and preparatory studies to be concluded by December.
Estimated to cost Rs 220 billion ($1.523 billion excluding taxes and other financial costs), the project plans to use tunnel boring machine to dig the tunnel of the project. The feasibility study for the Dudh Koshi Storage Hydroelectric Project recommends building a main underground powerhouse near the Sunkoshi River with four units generating 150-MW each and a small 35-MW hydro unit, near the toe of the dam. The reservoir type project will produce 3,443 gigawatt hours per year, higher than the expected annual output of 3,383 gigawatt hours of the proposed Budhi Gandaki scheme.
Likewise, the Asian Infrastructure Investment Bank (AIIB) has agreed to provide finance worth Rs 15 billion for Tamakoshi V project that will be developed at an estimated cost of $150 million. The project is being developed as a cascade project of 456-MW Upper Tamakoshi Hydropower Project.

NEA to check distribution losses

The Nepal Electricity Authority (NEA) aims to bring down distribution losses to 8.5 per cent within this fiscal year by checking the electricity pilferage.
According to NEA managing director Kulman Ghising, the NEA has shifted its focus to improve the reliability of energy supply, adopting stern governance measures at consumer touchpoints, and enhancing financial discipline at distribution centres. “We plan to achieve the reduction targets by optimum utilisation of sealed conductor cables in loss-prone areas, upgrading overloaded transformers and coordinating with the local administration to investigate cases of meter tampering and electricity pilferage,” he said, adding that the country has witnessed energy leakage of 11.28 per cent – in the fiscal year 2018-19 – resulting in financial losses amounting to millions, though the pilferage has come almost half down in last five fiscal year. “In the fiscal year 2014-15, the NEA had recorded some 19.87 per cent energy leakages due to weak power delivery infrastructure including substations and transformers.”
To check the pilferage and meet the new target to curb it, the state power utility has issued circulars to eight distribution centres and its division offices asking them to upgrade the capacity of transformers and balance the power load. The NEA has asked Janakpur, Attariya, Nepalgunj, Biratnagar and Butwal centres – that have recorded high distribution losses – to reduce more losses – whereas Hetauda, Kathmandu and Pokhara distribution centres – with low losses – have received low targets.
Likewise, the Province 1 office at Biratnagar with 24 distribution centre has been asked to bring down system losses to 8.8 per cent from the existing 12.15 per cent. The Province 2 office with 23 distribution centres has been directed to cut back losses from 23.36 per cent to 10.97 per cent. Similarly, the Butwal wing of the power utility with 11 distribution centres is expected to reduce losses to 9.26 per cent from 12.36 per cent. “And the Attariya office with 12 distribution centre is expected to bring losses down to 10.69 per cent from 14.39 per cent.”
Though, a 10 per cent reduction in energy loss has resulted in an increase in revenue of Rs 7 billion, the NEA has been able to reduce transmission and distribution losses to 15.32 per cent, according to the Distribution and Consumer Service Directorate of the NEA. “We aim to cut losses by strengthening the network, upgrading the capacity of the transformers, bringing new substations into operation to balance the load and keep tabs on electricity pilferage,” he said, adding that the reduction of distribution losses is considered by energy officials to be a fundamental effort consistent with achieving Sustainable Development Goal 7 (Sustainable Energy for All) and Nepal’s Nationally Determined Contributions for the United Nations Framework Convention on Climate Change.
Nepal has added more than 600 kilometres of power lines to domestic and cross-border electricity transmission network, and built 30 new distribution substations in the last fiscal year. The NEA plans to spend more than 50 per cent of its budget for the current fiscal year on increasing the capacity of transmission lines and power distribution infrastructure as the old system cannot manage the increasing power supply and distribution.
The NEA needs to overhaul current distribution system and existing substation, apart from new transmission lines construction with distribution grids in strategic industrial zones, the reliability of electricity transmission throughout the grid could be improved.
According to a report by the Asian Development Bank – the financier of the Power Transmission and Distribution Efficiency Enhancement Project – Nepal's power supply is expected to increase rapidly during the next several years because of commissioning of the 456 MW Upper Tamakoshi hydropower project and an additional 1,635 MW from multiple hydropower projects with planned commissioning by 2022.
The ADB has provided $150 million as a 32-year term concessional loan at 1 per cent interest during the eight-year grace period and 1.5 per cent interest after the grace period under the distribution enhancement project.

The lost electricity 
Fiscal Year – Distribution Loss (per cent of available energy)
2014-15 – 19.87 per cent
2015-16 – 19.80 per cent
2016-17 – 16.83 per cent
2017-18 – 14.82 per cent
2018-19 – 11.28 per cent

Slow progress in cheapest hydropower going to make it costlier

The slow progress in the construction of Upper Tamakoshi Hydropower project has escalated the cost of the project to more than double. Initially estimated to be completed at Rs 35 billion, the 456 MW peaking run-of-the-river hydel plant – in Dolakha district – has already cost to over Rs 70 billion by now.
The Upper Tamakoshi project – initiated in 2007 – has gone into construction in 2012, and was supposed to be completed in five years. With the time overrun, the cost overrun has been making the cheapest hydropower project constructed with the domestic funding an expensive one. “Interest payments on long-term loans alone have jumped from Rs 6.7 billion in 2016 to Rs 14.42 billion in two years,” an official at the project said, adding that the total project cost including interest on loans has been estimated at Rs 73 billion as of date. “The annual interest rate has been set at 11 per cent.”
The cost is going to escalate more as the project is likely to miss the deadline – of February 2020 – due to sluggish work. “The installation of the first penstock pipe in the lower vertical shaft of the hydropower plant was supposed to get the project rolling, but works have slowed to a crawl,” the official said. “But the project is likely to miss its deadline of February 2020,” he said, adding that the cost will again escalate with the missing deadline.
Though, the hydropower project has made a breakthrough in June – by fitting of pipes in the lower shaft is considered to be the most challenging part of the hydro-mechanical component – with the help of a team of European, Indian and Nepali engineers, multiple setbacks from machine breakdowns and technical mishaps has forced the power project to postponed the project completion deadline to February 2020.
The hydel plant has reported 98 per cent progress – as civil works of the project has been completed – but the multiple setbacks is again pushing the completion deadline of the project owing to poor work execution by the contractor. “The contractor has only installed 43 metres of pipe out of the 372 metres needed in two months since installation began,” the official added.
The complication in fixing the pipe installation is said could make the hydel project a pipedream, as it could take more than 15 months just to finish installing the remaining penstock pipes in the lower vertical shaft in the current pace of work. “The contractors are trying to speed up the work,” project director Bigyan Shrestha said.
The Nepal Electricity Authority (NEA) has also been continuously directing the contractors – Andritz Hydro of Austria and Texmaco of India – to carry out works in three shifts to complete the work within the new deadline time. After the Indian contractor Texmaco – that is overseeing the hydro-mechanical works – last year admitted that installation of the massive pipes weighing 27 tonnes each was beyond its scope, the NEA had appointed Austrian Company Andritz Hydro to complete the task.
After completion of the Upper Tamakoshi Hydroelectric Project, Nepal will be energy surplus country saving billion in energy import from India. According to Nepal Electricity Authority (NEA), Nepal paid India over Rs 22 billion for imported electricity in the last fiscal year.

Upper Tamakoshi IPO oversubscribed four times

The primary shares of Upper Tamakoshi Hydropower Ltd (UTHL) have been oversubscribed by nearly four times.
Some 15.89 million units of primary shares worth Rs 1.59 billion of Upper Tamakosi Hydropower drew subscriptions worth over Rs 6.32 billion by the closing today, confirmed deputy manager of Citizens Investment Trust (CIT) Roshan Jung Karki. CIT is the lead issue manager of the hydropower's initial public offering (IPO) that has a face value of Rs 100 per share.
The national pride project is being developed by a subsidiary of the state power utility Nepal Electricity Authority (NEA). The hydropower company opened its IPO of 15.8 million shares on Thursday and by Monday when it closed, 346,166 persons had applied for 67 million shares worth Rs 6.7 billion. The share allotment process will take at least two weeks.
An investor will get at least 40 units of shares of the 456-megawatt (MW) peaking run-of-the-river hydropower company that is being constructed by mobilising domestic resources.
Apart from the current 15 per cent offering to the general public, the hydropower has already issued 105.9 million units of shares for the locals of the project-affected Dolakha district last week. Public shareholders, including the locals of Dolakha, will hold 25 per cent ownership in the project.
Though the application process for the primary shares for general public was carried out through Centralised Applications Supported by Blocked Amount (C-ASBA) system from member banks of ASBA, the issue manager could not block previous applicants of the earlier offering which was conducted manually.
Similarly, some 18.3 million units of shares (17.28 per cent) have already been allotted to the members of Employees Provident Fund (EPF), while staffers of EPF and the project received 2.88 per cent of the shares (304,290 units). Likewise, staffers of Upper Tamakoshi and NEA have been allotted 3.84 per cent (4.07 million units) of the shares.
The much-awaited hydropower project is expected to start electricity generation by mid-July next year. The model project is expecting commercial generation by mid-November, 2019.
Last week, the project office extended the completion deadline by six months as it wasn’t going to be able to start operating one of its six turbines by December 2018 and complete the entire project by April 2019 as originally planned due to earthquakes, the Indian trade blockade and other technical issues including dillydallying by one of the contractors as reasons for the delay in the national pride project where 95 per cent of the construction works have been completed.
The delays has pushed the cost of the project that was initially planned to be constructed at a cost Rs 35 billion but the final bill is now expected to reach Rs 70 billion.

Upper Tamakoshi hydro applies to Sebon for Rs 5.18 billion primary issue

Though, the much awaited Upper Tamakoshi Hydropower project has been redesigning its tunnel due to geographical trouble that is going to delay power generation for at least six months, it has geared up for the public offering.
As it has completed 50 per cent of the construction work, the Upper Tamakoshi Hydropower has last week applied to the capital market regulator, Securities Board of Nepal (Sebon), for Initial Public Offering (IPO), according to acting chief of the power project Bigyan Shrestha.

The company has appointed Citizen Investment Trust (CIT) as the issue and sales manager for the issuing of Rs 5.18 billion worth IPO that will be the largest public offerings till date.

“In the first phase, Upper Tamakoshi Hydropower is floating shares to the employees of its lenders like Employees’ Provident Fund (EPF) and its members, employees of hydropower, Nepal Electricity Authority (NEA), Nepal Telecom (NT), Citizen Investment Trust (CIT) and Rastriya Beema Sansthan (RBS),” he said, adding that the Dolakha-based 456-Mega Watt (MW) hydel project has a paid-up capital of Rs 10.59 billion. “They will be floated some 24 per cent of the share in the first phase.”
Immediately after the first phase, some 10 per cent share will be issued to Dolakha locals in the second phase.

The Employment Provident Fund employees might get around 2,542 units of shares per employee, whereas some 2,74,492-unit shares has been allotted for Rastriya Beema Sansthan employees, Nepal Electricity Authority and Upper Tamakoshi employees some 40,66,560 unit, and Nepal Telecom employees have been allotted some 8,23,478 unit shares, according to the shares of the institutions.
In the third and last phase, the project will float 15 per cent shares for the general public, making it a total of 49 per cent.
The institutional investors will hold the remaining 51 per cent of the shares. Of the 51 per cent, Nepal Electricity Authority is holding 41 per cent, Employment Provident Fund 10 per cent share and two per cent debenture, Nepal Telecom six per cent, and Citizen Investment Trust and Rastriya Beema Sansthan is holding two per cent share each of the Rs 35.29 billion-hydel project. The institutional investors have already paid Rs 5.10 billion of the total Rs 22 billion what they have pledged for. The government is investing Rs 11.08 billion in the project that is expected to be completed by 2014-15, though the recent tunnel problem will delay it by six months to one year.

Accoring to the capital market regulator, it will approve the hydel project’s public offering after the review.

Public participation in hydro projects to help Nepal graduate from LDCs status

Locals of Rasuwa district have added assets worth Rs 4,439 per head in an average, apart from cash dividends in the last three fiscal years thanks to Chilime Hydropower that floated shares to the locals in 2010.
The distribution of wealth by Chilime Hydropower in Rasuwa — ranked 40th in the Human Development Index among the 75 districts in the country — will not only help the district climb up the ladder in the index but also come out of the poverty trap.
The 22.1 MW Chilime Hydropower project had floated 960,000 units of ordinary shares at a face value of Rs 100 per unit to the locals of Rasuwa district, where it is located.
The first indigenous hydropower project that has been constructed with domestic capital and technical know-how had then distributed 60 per cent cash dividend from the profit of fiscal year 2009-10; 30 per cent cash and 40 per cent stock dividend from fiscal year 2010-11’s profits; and 20 per cent cash and 30 per cent stock dividend from the profit of fiscal year 2011-12 to its shareholders.
The locals have received a total of Rs 1.92 billion stock dividends at current market prices and Rs 113.28 million cash dividends in the last three fiscal years.
According to the latest census of the Central Bureau of Statistics (CBS), Rasuwa has 9,778 households, with a total population of 43,300, which means today each individual shareholder of Rasuwa has Rs 4,439 worth of assets in the form of Chilime Hydropower’s stocks.
The Chilime model of hydropower development — that has been replicated at the Upper Tamakoshi Hydropower — is the best example of wealth creation and distribution through capital market, according to market analyst Rabindra Bhattarai.
However, it took the government and Nepal Electricity Authority (NEA) — one of the key promoters of Chilime Hydropower — almost 10 years to replicate the model that has proved to be an effective instrument to alleviate poverty.
"Locals should be involved and get shares not only to boost local growth but also to develop and exploit hydropower that has tremendous potential to help Nepal graduate from the current Least Developed Countries (LDCs) status to Developing Country club, by distributing wealth through public participation," according to president of Federation of Nepalese Chambers of Commerce and Industry Suraj Vaidya.
"The government is planning to graduate Nepal from the LDCs status by 2022 and hydropower development with active public participation will make the dream possible," he said, adding that it will also make locals responsible and the hydropower projects will not face any unnecessary trouble as locals will develop a sense of ownership as is happening with the Upper Tamakoshi Hydropower project.
Dolakha, which is ranked 37th in the Human Development Index, will be the next district to climb up the ladder in the index as the 456 MW Upper Tamakoshi Hydropower project is going to change the future of not only the district but also of the country by boosting energy supply.
The hydropower project which is under construction with active participation of locals will be completed by April 2016. It has completed around 50 per cent of construction and is planning to float shares worth Rs 3.60 billion soon to locals of Dolakha district and NEA, besides employees of lender agencies like Nepal Telecom, Employees Provident Fund, Rastriya Beema Sansthan and Citizen Investment Trust in the first phase, according to the hydropower company that will float shares worth Rs 1.58 billion to the general public in the second phase.
Energy is the key priority in the budget for next fiscal year, according to finance minister Shankar Koirala, who was once the energy secretary too.
Energy is the engine of growth, he said, adding that the budget will concentrate on energy also to reverse the trend of import-based economy to export-based economy, which is not possible without enough power supply for industrialisation.
"Hydropower projects — if attracted to capital market with incentives through budget — will not only help supply energy but also help reduce poverty," said expert member of the Securities Board of Nepal (Sebon) Dr Rewat Bahadur Karki.
Currently, there are only four listed hydropower companies — National Hydropower, Butwal Hydropower, Chilime Hydropower and Arun Valley Hydropower — at Nepal Stock Exchange (Nepse). But the secondary market will have two more companies — Upper Tamakoshi and 22-MW Sanima Mai Hydro — soon as Sanima Mai has already floated 1,055,000 units of shares at a face value of Rs 100 per unit making it a total of Rs 105.5 million to the locals recently.
The increasing number of listed hydropower companies will also help the capital market expand, apart from helping in poverty alleviation.
According to the amended Securities Registration and Issuance Regulation – 2065, hydropower companies must float shares to locals before they open their issue to the general public. "A company has to float a minimum of 30 per cent shares to the public and out of the 30 per cent, five per cent has to be separated for the company’s staff, 10 per cent for locals and the remaining for the general public," states the amended regulation that has fixed a lock in period of three years for shares distributed to locals.

Sanima Mai's IPO to strengthen hydropower sub group

The proposed primary share issue of Sanima Mai Hydropower is going to increase the hydropower sub-group's — among the nine sub-groups in the stock exchange — strength as the current market is largely dominated by banks and financial institutions.
The hydropower sub group has only four hydropower companies — Arun Valley Hydropower, Butwal Power Chilime Hydropower and National Hydro — with some 43,877,556 units of shares at a face value of Rs 100 per unit making a total of Rs 4.38 billion worth shares, which has 5.7 per cent share in the total market capitalisation, according to the seven months data of the central bank.
The entry of the fifth hydropower company that is going to issue its Rs 105.5 million worth primary shares to the locals of some nine village development committees (VDCs) —effected due to the hydropower — in Ilam districts, in the first phase, will boost the market capitalisation of the hydropower sub group. It will float Rs 211 million worth primary shares to the general public in the second phase, which will raise the company's paid up capital to Rs 1.58 billion.
The 22-MW hydropower company has assigned NCM Capital as its sales and issue manager for the ordinary shares.
The entry of Upper Tamakoshi by the end of this fiscal year will make the hydropower sub group as stronger as the banks and financial institutions sub group that shares some 70 per cent of the total market capitalisation.

Projects of national pride see low performance

The government has handed over projects of national pride to the Investment Board as the projects have not seen significant progress.

"The government has handed over 14 projects of national pride to Investment Board for immediate implementation," said caretaker finance minister Barshaman Pun during the mid-term development evaluation meeting here today.

Prime minister Dr Baburam Bhattarai had listed 17 infrastructure projects as 'National Pride' in his ambitious Immediate Action Plan, which he had unveiled with much fanfare last February.

However, except for Upper Tamakoshi hydropower, all the other projects have failed to move ahead smoothly due also to the government's non-priority towards development and concentration on politics.

Speaking, most probably, in his last meeting at the Finance Ministry, Pun also mentioned of Nepal Investment Year 2013, that has also not been moving ahead due to the government's apathy towards creating an investment friendly environment and security concerns from the private sector. Lately, the government has completely failed to boost the private sector's confidence that has plunged to an all-time low due to repeated attacks on them.

Boosting the confidence of the domestic private sector is key to attracting foreign direct investment as they are the bridge to bringing the foreign private sector to the country.

Pun, however, said that 60 per cent of the civil work on intake of Rani Jamara Kulariya irrigation project has been completed. "The construction of Babai and Sikta irrigation projects has been going on," he added.

The country could not get a full-fledged budget for the current fiscal year and has been operating through the interim public expenditure arrangement, which has slowed down development activities, he said, adding the government has spent Rs 7.66 billion under capital expenditure by the end of mid-January.

The government has spent a total of Rs 104.12 billion in the first six months of the current fiscal year. "The total expenses is 29.59 per cent of the total estimation of expenditure," said Pun, adding that of the total, a large chunk has been spent on recurrent expenditure that is salaries and administrative expenses at Rs 86.90 billion, whereas it spent Rs 9.55 billion under financial management.

"The government could do very little due to limited space," Pun added, claiming that he has, however, brought some regulatory changes, despite his limitations. "The government has received Rs 15.76 billion foreign aid commitment in the first half of the year, though it has been able to mobilise Rs 134.56 billion revenue."

"Despite a slowdown in economic activities, low agriculture production and industrial output, the economy is expected to grow by 4.1 per cent," Pun claimed, downward revising his earlier projection  of 5.5 per cent growth. But development partners — World Bank, Asian Development Bank and International Monetary Fund — have projected economic growth at a little over three per cent for the current fiscal year.

He, however, boasted of the road expansion drive. "A total of 102.79 km road has been widened in Kathmandu valley," he said, adding that some 84.69 km road in Kathmandu, some 15.60 km road in Lalitpur and some 2.50 km in road Bhaktapur have been widened so far.

Likewise, under the cross border customs road expansion to six lane plan to expedite external trade, the government has started the expansion of Bhairahawa and Biratnagar customs roads recently, Pun added.