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.

Second Nepal-Bangladesh JSC meeting discuss cross-border energy cooperation

A two-day joint steering committee (JSC) meeting on energy cooperation between Nepal and Bangladesh kicked off in Dhaka from today. The meeting will look into ways of capitalising on plans and provisions of the bilateral understanding on energy trade and investment.
The meeting is discussing ways to enhance energy trade and investment between the two countries, apart from discussing ways to enhance cross-border energy cooperation and promote investment in the hydropower sector of the two nations, according to the Ministry of Energy, Water Resources and Irrigation (MoEWRI).
A seven-member team of the MoEWRI that is participating in the second meeting between the respective authorities of the two countries – which started today after Nepal and Bangladesh inked a memorandum of understanding (MoU) on energy cooperation last August in Kathmandu – is led by secretary Dinesh Kumar Ghimire. Likewise, the Minister for Power, Energy and Mineral Resources of Bangladesh is leading the delegation from Bangladesh. The first meeting was held in Nepal.
The Nepali team will also discuss on electricity trade by building a dedicated transmission line through the Siliguri Corridor in India which separates Nepal and Bangladesh. The meeting will discuss the agenda items contained in the memorandum of understanding on Cooperation in the Field of Power Sector the two countries signed last August. “Apart from transmission connectivity, they will discuss the possibility of trading electricity generated by Sunkoshi basin projects, particularly Sunkoshi 2 and Sunkoshi 3,” according to a source at the Nepal Electricity Authority (NEA).
Nepal and Bangladesh have been planning to enhance energy cooperation, especially after the Power Trade Agreement (PTA) that was signed with India in 2014. Both the countries have already agreed to focus on electricity generation, development of hydroelectricity, cross-border transmission lines, development of efficient human resources in the hydroelectric sector, promotion of government-to-government and private sector investments, grid connectivity, power efficiency and investment in renewable energy.
The main agenda of this meeting will be to discuss a dedicated high voltage double circuit transmission line that will need to be installed to supply Nepal’s electricity through India to Bangladesh. The Bangladeshi government has already committed to buy 500 megawatts (MW) of energy produced by the Upper Karnali hydropower project, which is being developed by India-based GMR. Moreover, Bangladesh has expressed interest to buy 9,000 MW of electricity from Nepal by 2040.
During past meetings, Nepal and Bangladesh have pledged to make their best efforts in devising such trilateral arrangements as a common agenda. According to the agreement in the first meeting, the secretary-level JSC and the joint secretary-level joint working group (JWG) will meet every year to discuss and take forward the issues related to cooperation in the power sector between the two nations.

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.

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.

IFC, GMR Group partner for power projects to unlock hydro potential and promote growth

International Finance Corporation (IFC) – a member of the World Bank Group – has partnered with India’s GMR Group to develop the 900 MW Upper Karnali hydropower plant, and two transmission line projects in Nepal.
The projects will meet energy demands and create jobs in Nepal and the South Asia region.
The transmission projects will evacuate power from the Upper Karnali and 600 MW Upper Marsyangdi Hydropower projects in Nepal. IFC InfraVentures – a global infrastructure project development fund – is a co-developer of these projects. IFC will make investments for project development and help achieve financial closure for these projects, which have a total investment outlay of $1.7 billion. The Upper Karnali plant will create over 3,000 jobs and help reduce greenhouse gas emissions of nearly two million tonnes of carbon dioxide equivalent annually.
According to the joint development agreement, 12 per cent of the power generated from the Upper Karnali project will be provided free of cost to Nepal.
"This is the very first project for which the Project Development Agreement (PDA) was executed by the Investment Board,” said chief executive officer of Investment Board of Nepal Radhesh Pant. "IFC's expertise in the international financial markets brings complementarity and synergy to GMR's strengths in regional infrastructure," he said, adding that IFC's involvement will help the project achieve timely financial closure, construction, and operational milestones.
"IFC’s financing and global expertise in the hydro sector will help the projects become a game changer for Nepal’s hydropower sector and will attract international investors,” said group chairman of GMR Group G M Rao. "The development of these projects complements the initiatives taken by India and Nepal to establish high-capacity cross-border transmission links to facilitate power trading between the two countries," he added.
Nepal has significant hydropower potential but less than one per cent of it is developed. Only an estimated 46 per cent of the population has access to electricity. Over the last decade, demand for power in Nepal has grown at nine  per cent annually, while supply has not kept pace.
“Hydropower is a powerful engine for economic growth in Nepal,” said IFC director for Asia Pacific Vivek Pathak. "These projects will boost a common energy market in South Asia, create sustainable employment, improve quality of life, and provide reliable and clean energy for local industry," he added.
Nepal is a priority country for IFC.
Since 2008, IFC has been working closely with Nepal's private sector through investments and advisory services. IFC has been working in developing infrastructure, tourism, financial markets, transportation, and trade finance in the country. In recent years, IFC has also been assisting the government to make doing business easier.

Investment Board to approve Rs 25 billion cement factory

Investment Board of Nepal is going to approve Rs 25 billion cement factory.
The board meeting after the Tihar festival is going to approve India's Reliance Industries' Rs 25 billion cement factory for foreign direct investment, informed external affairs head of the board Ghanashyam Ojha.
The board – chaired by the Prime Minister Sushil Koirala – has received the proposal from the Reliance Industries that is owned by India's Ambani group, he said, adding that the company is planning to set up the cement factory in either the central region or the eastern region of the country. "The Department of Mines and Geology has already given its permission to the factory in mid-July."
The approval got delayed due to the board's busy schedule with the project development agreement (PDA) on Upper Karnali Hydropower Project with another Indian firm GMR.
After the board's approval – post Tihar festival that ends on October 25 – Reliance will conduct environmental impact assessment (EIA). The company will then submit the EIA report to the board, through Ministry of Environment.
After the clearance of the EIA from the board, Reliance will start the work to set up the factory, Ojha added.
Reliance has, however, demanded that the government provide 60 MW of uninterrupted supply of electricity to the factory, he said, adding that the company has demanded that it should be provided subsidy in the import of coal or other fuel for generating electricity, in case the government is unable to provide uninterrupted supply of electricity.
More cement companies both domestic and foreign investment are coming up lately as the demand for cement has increased due to construction of big infrastructure projects including hydropower projects lately.
The government – to encourage the cement industries – promised to provide access road and electricity to new cement factories. According to Trade and Exports Promotion Center (TEPC), import of cement has gone down by 19.2 per cent to Rs 3.18 billion in the fiscal year 2013-14 compared to a fiscal year ago in 2012-13, when the country saw Rs 3.94 billion worth cement import. But the country has seen rise in import of clinker as most of the domestic cement factories are dependent on imported raw material for cement that is clinker. Only few of the cement factories rely on domestic mines and majority of them have been importing clinkers.
According to central bank, in the fiscal year 2013-14, the country imported Rs 9.71 billion worth cement and clinkers that is some three per cent higher than that of a fiscal year ago in 2012-13, when the country imported Rs 9.42 billion worth cement and clinkers.

Investment Board of Nepal, GMR sign PDA for Upper Karnali

Investment Board of Nepal and Indian company Grandhi Mallikarjuna Rao (GMR) Energy today signed Project Development Agreement (PDA) for construction of the $1.5 billion Upper Karnali Hydropower Project in western Nepal.

Investment Board of Nepal chief executive officer Radhesh Pant, president of Hydro Energy Business Unit of GMR RV Seshan and Nepal chief Harvinder Manocha signed the agreement after six years of signing of memorandum of understanding between Nepal government and India’s GMR-ITD Consortium.

The Project Development Agreement is expected to open a door for the Indian company to move ahead for financial close and construction of the 900 megawatt Upper Karnali Hydropower Project.

According to the PDA, Nepal will get 27 per cent free equity and 12 per cent (108 MW) free electricity from the project. Likewise, the agreement also ensured handover of the project, along with the 100-km transmission line, to the government after 25 years of operation.

GMR is planning to sell the remaining 88 per cent energy to India, Bangladesh and Nepal. However, the price will depend on the final project cost and the situation of demand and supply in the market on completion of the 900 MW hydel project.

Likewise, GMR will also construct a 2-MW project that will supply electricity round the year to locals. More than 2,000 people are expected to get employment opportunity from the project estimated to cost Rs 145 billion.

The project will bring road connectivity, hospital, technical school and bridge in the district.

Prime Minister Sushil Koirala, some of his cabinet colleagues, senior government officials, visiting Indian home minister Rajnath Singh and ambassador to Nepal Ranjit Rae were present at the signing ceremony at Singha Durbar in Kathmandu, on the occasion.

The agreement will be implemented with immediate effect, said deputy prime minister and home minister Bam Dev Gautam, after signing of the agreement.

"The agreement has opened the door for developing other large hydropower projects in Nepal," he added.

Likewise, wishing timely completion of the project visiting Indian home minister Singh termed the agreement a 'historic' one. "I believe this is the single biggest foreign investment in the history of Nepal," he said, adding that the success of GMR in Nepal will ensure credibility of both the company and India both.

The Investment Board of Nepal had been working hard on PDA negotiation with GMR since last June. But according to Pant, serious negotiations actually began last September. "Today's PDA agreement is the outcome of several rounds of discussions with stakeholders and has addressed issues raised by them," he said, adding that the board has prepared the PDA document according to the international norms and standards and good practices. Pant also said Nepal can buy energy at competitive market rates from the export-oriented project.

"GMR Group will mobilise 25 per cent equity capital while the remaining 75 per cent will be raised from international lenders including International Finance Corporation (IFC)," Seshan said, after signing the agreement.

There will not be any problem in raising prerequisite equity and debt capital to execute the project,” he said, adding that the GMR was confident of completing the financial closure within two years, according to the PDA. "We will implement the project within the next five years."

However, construction of re-regulating dam by GMR is yet to be finalised.

"The decision will be taken based on the consultation with Nepal government once the joint study team submits its report,” Seshan added.

According to the PDA, the Indian developer will have to build the re-regulating dam on its own, if the study report shows Upper Karnali will impact water flow for downstream irrigation project. Construction of the re-regulating dam was suggested by an independent study team has been included in the PDA document after experts and Irrigation Ministry drew attention to the matter, saying the hydropower project would affect irrigation projects.

Likewise, planning commission vice chair Dr Govind Raj Pokharel, who led the technical team to study the PDA, hoped that the PDA signing would be a first step towards the prosperity of Nepal. "It will also send message of an improved investment climate in the country," he added.

The Cabinet has approved the PDA yesterday after the Investment Board of Nepal approved the amended PDA draft a day ago on Thursday.

The government yesterday also formed a high-level task force led by Dr Pokharel for the implementation of the project that is planned to be generate power by 2021. The panel will help address problems arising during project development.

The 900-MW Upper Karnali Hydro Power project – located on Karnali river in the Surkhet, Dailekh and Achham districts – was awarded to the GMR Group through an International competitive bidding process in 2008 on BOOT model.

EDF in talks to buy GMR stake in Upper Karnali Hydropower project

French government-owned power utility Electricite de France SA (EDF) is planning to buy stake of GMR's hydropower project in Nepal.

The EDF is currently in talks with Bangalore-based infrastructure conglomerate GMR Group to acquire a stake in 900-megawatt (MW) Upper Karnali hydropower project, according to the French company that confirmed EDF's interest in acquiring stake in the hydel project.

The GMR will still be lead investor in the hydropower project as the EDF will have less than 51 per cent stake.

Though the value of the possible deal is not confirmed, the EDF’s interest in the Indian energy sector has been reflected by its earlier investment in ACME Solar Energy.

EDF’s renewable energy arm and EREN, another French company, plans to invest a total of Rs 8.80 billion in New Delhi-based ACME Solar to set up solar power plants in India.

As the GMR Group has previously articulated its 'asset light, asset right' policy to 'develop, build, create value, divest and reinvest', the deal looks possible, the company added.

The group has sold several of its power, road and airport projects. GMR has 15 power generation projects, of which eight are operational and seven are being built. It also has nine road projects, of which seven are operational.

GMR Infrastructure had a total stand-alone debt of Rs 6.52 billion. The group’s consolidated debt stands at 642.22 billion as of September 30.

GMR Infrastructure’s loss widened to Rs 7.05 billion in the quarter that ended in December compared with a loss of Rs 3.47 billion a year ago and Rs 6.28 billion in the preceding quarter.

GMR Group today said that it had sold a 74 per cent stake in GMR Ulundurpet Expressways to India Infrastructure Fund of IDFC in a deal that releases capital to the tune of Rs 3.16 billion and reduces debt on its books by Rs 7.20 billion.

As executing a hydropower project is a time-consuming, costly and tedious process that includes a thorough survey and investigation, preparation of a detailed project report, relocation and resettlement of the affected population and infrastructure development, the GMR changed its policy to 'asset light, asset right'.

A consortium comprising GMR Energy and Italian-Thai Development Public Company (ITD) is developing the 900-MW Upper Karnali hydropower project on Karnali river on build, own, operate and transfer (BOOT) model.

While the country is suffering 12 hours scheduled load shedding everyday, most of the investors, mostly Indian investors, have been interested in developing hydropower, also due to its huge untapped potential, but prolonged political transition has delayed the projects.

GMR may exit partially from Nepal

The Indian Group that has been planning to construct Upper Karnali hydropower project may exit some of its assets in Nepal, according to the news reports.

It is assessing valuation of Nepal assets that could be in the range of Rs 1,000 crore Indian Currency (IC), the reports claimed, adding that the GMR has two large projects with 100 per cent stake in Nepal. "The project that they are currently working on is Upper Karnali hydropower project that the GMR Energy and GMR Infrastructure are co-developing and co-owning the hydel project. They have around 70 per cent to 80 per cent stake in the project.

But the reports claimed that GMR has started talks with buyers like Morgan Stanley.

The valuation is fairly substantial because the amount that they had put in into the hydropower project was roughly around Rs 4500 crore IC to Rs 5000 crore IC and they are looking at least Rs 1,000 crore IC.

GMR will need to – at some point need – probably to temper its price down and bring it to around Rs 8,00 crore IC, according to the reports.

The GMR has also been looking at consolidating its road assets, if the reports are to be believed. "So amongst their road assets there is one sell which is likely to happen sometime."

The GMR has been looking at selling the Vijayawada and Hyderabad highway project since last eight-nine months, the reports quoted sources adding that Morgan Stanley Infrastructure Fund has emerged as a likely frontrunner to buy that out in valuations roughly around Rs 8,00 crore IC to Rs 9,00 crore IC. The overall debt of GMR currently stands at around Rs 40,000 crore IC.

The partial selling of Nepal assets is expected to bring them an interest saving of roughly around Rs 1,00 crore IC, if they get the valuation that they are looking at. "Even the road assets as a whole should bring in some amount of interest saving as well," the reports in Indian media projected.