Nepal needs to increase investments in energy by fourfold: World Bank

In line with the ambitious target of producing 15 gigawatts (GW) in 10 years and meeting the rising domestic demand for electricity, Nepal needs to increase investments in the energy sector by two- to fourfold, according to a World Bank report.
“A twofold to fourfold increase in public and private investment is needed to meet the projected demand in the country and utilise the sector’s export potential,” the report reads, adding that electricity sector investments will need to accelerate substantially to an average of $1.3 billion to $2.1 billion annually between 2018 and 2040.
The report, which suggests policy-level reforms to strengthen the institutional capacity of power sector institutions with the view of attracting large-scale investment in the energy sector, has come at a time when Nepal’s foreign direct investment (FDI) level has fallen by 25.4 per cent year-on-year.
According to the central bank, the amount of direct investment in Nepal declined to Rs 13.06 billion in the fiscal year 2018-19 from Rs 17.52 billion in a fiscal year ago 2017-18.
The Nepal Electricity Authority (NEA) estimates that the country will have a surplus of around 8,000 megawatts (MW) by 2025 as its generation capacity is expected to reach 10,924 MW, while peak demand is likely to reach 2,981 MW.
Infrastructure experts say the generation and export targets will not be achieved unless the government focuses on implementing policies to facilitate investments in the sector at the earliest. “The problem is not with the laws, policies and work procedures governing foreign or private investment in the sector, the problem is with the hassle-laden processes that have dissuaded potential investors,” said a former secretary at the Ministry of Energy, Water Resources and Irrigation Anup Kumar Upadhyay.
According to Upadhyay, Nepal should facilitate domestic and foreign investment in export-oriented projects by stringently monitoring systemic delays by authorities and eliminating social and financial hurdles faced by investors such as local obstructions, risk hedging and profit repatriation.
“It will be important to create an enabling environment for foreign investment and financing to flow into the sector in a sustainable way while managing fiscal commitments and contingent liabilities risk,” reads the report issued by the multilateral institution, which has financed the construction of high capacity transmission lines and hydel schemes.
According to the World Bank, Nepal needs infrastructure investments of around 10 to 15 per cent of the gross domestic product (GDP) annually for the next 10 years, and the success of these investments will depend on the timely implementation of investment-related legislation that meets good practices.
The report has come at a time when the Finance and Energy ministries are divided over contributions from the ministries and the state-owned power utility to the hedge fund, a financial instrument used as a cushion against currency fluctuations faced by investors who bring investments both in debt and equity in foreign denominations.
Negotiations between the Energy Ministry and a consortium of Chinese and Nepali developers of the 600 megawatt (MW) Upper Marshyangdi project including Butwal Power Company (BPC) have stalled after the ministries locked horns over the terms of the hedging mechanism.
Earlier, the Korean developers of the 216-MW Upper Trishuli 1 Hydroelectric Scheme had also faced bureaucratic impediments owing to hedge fund contributions, which were sorted out following months-long discussions.
According to independent power producers (IPPs), there is a funding gap in energy projects, and foreign investors have expressed interest in channelling investments in the sector but the country lacks a proper risk-sharing mechanism between investors and the government. “Judging by the foreign direct investment (FDI) commitments, we can say investors are interested but the government’s inability to share business risk and assure investors a high level of socio-economic support has deterred the possibilities,” according to vice-president of the Independent Power Producers’ Association of Nepal (IPPAN) Kumar Pandey.
Investment Board Nepal (IBN) data revealed that Nepal received investment pledges of  Rs 36 billion from China and Rs 10 billion from India in 2018. But a large portion of those pledges is yet to materialise in the form of direct investment.
The report has urged stakeholders to strengthen the enabling conditions for electricity trade with its neighbours by establishing the appropriate legal, regulatory and institutional environment for energy export.
The report coincides with the attempts of policy makers to end the deadlock in negotiations over financing and implementation modalities of the second cross-border transmission line between Nepal and India, and urge their Indian counterparts to establish government policies related to energy banking in India which will allow its power sector regulator to formalise energy exchange between the two countries, which is currently done through mutual agreement.

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.

Business icon Prabhakar Rana passes away

A pioneer of Nepali tourism industry Prabhakar SJB Rana passed away while undergoing treatment in New York yesterday. Rana, 84, was admitted to the hospital one year ago.
Starting his career in the hotel industry, Rana built an empire with his honesty and moral in business. Engaged in multiple business including tourism, trade, automobiles, and hydropower, Rana believed in earning credibility and transparency in his business rather than making profits because ‘that’s what makes businesses successful’, according to him.
The first generation of Nepali entrepreneurs, chairman Emeritus of Soaltee Crowne Plaza, Rana was not only recognised for his initiative to bring an international hotel chain to Nepal but also for promoting tourism through hotel.
Rana was the founding chairperson of Soaltee Crowne Plaza and later on the chairman emeritus of the five-star hotel, though Soaltee was founded in 1966 by late prince Himalaya Bikram Shah and late princess Princep Rajya Laxmi. Rana later converted the hotel to a public limited company in 1975. Soaltee Crowne Plaza is one of the three hotels listed in the Nepal Sock Exchange (Nepse).
Until recently he was working on Soaltee Westend Hotel in Nepalgunj expanding the Soaltee brand outside the Kathmandu Valley.
Starting from the hotel industry, Rana expanded his business to travel and trekking, automobiles, tea garden and hydropower projects. He is also the founder president of Hotel Association Nepal (HAN) and Pacific Asia Travel Association (PATA) Nepal chapter.
Issuing press notes, both HAN and PATA said Rana could solely be credited for introducing international standards in the hospitality sector of the country.
Rana established Sipradi Trading – the authorised dealer of Tata Motors in Nepal – in 1982. In 1986, he invested in Surya Nepal, a multinational undertaking in joint partnership with firms of India and UK. Likewise, He started Bhotekoshi Power Company (BPC) – the first privately funded, run-of-the-river (ROR) power project in Nepal – in 1996.
Besides, he has also invested in Himalayan Tea Garden and Amravati Travels.
Rana was both professionally and personally close with late kings Mahendra and Birendra and in recent times with former king Gyanendra. But he never misused the power as usually is seen. He kept his freidship and professionalism separate though he was business partner of forme king Gyanendra.
He is survived by a son Siddhartha and a daughter Maya. Siddhartha Rana is currently looking after the entire business operations. The final rites of Rana will be performed in New York tomorrow.

Industrial Promotion Board approves up gradation of hydel projects

The Industrial Promotion Board (IPB) has approved up gradation and capital increment of some hydropower projects with conditions.

The board meeting today also directed the concerned authorities to form committees for detailed studies before forming a policy on cooperatives, and Foreign Investment and Technology Transfer, besides the gutkha industry.

"The board approved up gradation and capital increment of Kabeli 'A' Hydropower Project (37.5 MW) — promoted by Kabeli Energy, a subsidiary of Butwal Power Company (BPC) that is estimated to cost $92 million — 120-MW Lekhu – a developed by Green Ventures that has committed Rs 16.18 billion investment – and 50-MW Balefi Hydropower – promoted by Balefi Jalbidhyut Company and estimated to cost Rs 5.88 billion apart from approving Himal Hydro's request to invite foreign investment and loan agreement of Sino-Hydro from China Exim Bank," according to a source.The board also approved the capacity upgradation request of Bottlers Nepal Tarai Ltd. The three hydropower – Kabeli, Lekhu and Balefi – and Chitwan-based plant of Bottlers Nepal Tarai have pledged Rs 31 billion investments. Bottlers’ Nepal had asked permission from the Department of Industry a month ago for upgrading the plant’s capacity 203,000 kl per day from the current 8,850 kl per day capacity. The company will pump in around Rs 2.70 billion in the plant. Bottlers Nepal has invested Rs 55 million in its Chitwan-based plant till now.

The meeting chaired by Industry Minister Shanker Prashad Koirala also asked the concerned departments to form committees before bringing a policy on cooperatives that has lately been in the news for all the wrong reasons, gutkha industry that has been banned in India lately and is waiting for a policy to enter Nepal, and Foreign Direct Investment (FDI) and Technology Transfer Act to promote foreign direct investment in the country, the source said, adding that the board has been working on to create an investment friendly policy that will help boost manufacturing growth in the country.

The country has been witnessing a slowdown in manufacturing growth due to continued power shortage, labour problems and strikes, but the board's decision today will help generate electricity for industries, according to the source, who expects such policy clarity will encourage investors.