World Bank and ADB join forces for sustainable development of Nepal’s hydropower sector

The World Bank and the Asian Development Bank (ADB) announced collaboration to strengthen Nepal’s hydropower sector specifically in the context of the proposed Upper Arun and Dudh Koshi hydropower projects.

A memorandum of understanding (MoU) stipulating cooperation between the two institutions for an initial period of five years was signed today on the sidelines of COP28 by World Bank vice president for South Asia Martin Raiser and ADB vice president for Sectors and Themes Fatima Yasmin.

"The full potential of Nepal’s enormous hydropower resources cannot be realised without close partnership between the Nepali government, development partners and the private sector," World Bank vice president for South Asia Martin Raiser said, adding that with the MoU, the ADB and the World Bank are laying the foundations for closer collaboration in financing and policy advice in Nepal’s hydropower sector, with the aim to support the country’s green, sustainable and inclusive development for decades to come.

"This agreement between ADB and the World Bank is a significant step in strengthening Nepal's energy security amid rising demands from population growth and urbanisation," ADB vice president for Sectors and Themes Fatima Yasmin said, adding that it also fosters power trade with neighbouring countries, promoting regional cooperation, economic growth, and green and inclusive development. "ADB is committed to promoting clean energy solutions that align with climate action goals. Our commitment goes beyond generating power; it's also about creating positive impacts on communities, livelihoods, and the environment and contributing to a more sustainable future for all."

The MoU specifically targets three critical areas for collaboration: enhancing country-level collaboration, strengthening co-financing, and boosting joint action on climate change. The pilot approach between the two multilateral development banks provides opportunities for collaboration in knowledge and experience sharing to ensure common understanding of the hydropower sector in Nepal, joint analytical studies, and consultation in support of the development of the hydropower sector.

Under the MoU, the World Bank and Asian Development Bank will also work together on strengthening the institutional capacity of Nepal’s executing and implementing agencies in the development of large hydropower projects, and the preparation and financing of projects in the energy sector. 

This is the first MoU signed between ADB and the World Bank following the joint statement on strengthening collaboration for greater impact issued by the heads of multilateral development banks at the World Bank-IMF Annual Meetings in Marrakech in October, 2023.

NEA adds 86-MW electricity to national grid from Solukhola Dudhkoshi

Though, commercial production will start within 15 days, electricity generated from the Solukhola Dudhkoshi Hydropower Project – the third largest hydropower project of the country and the largest till date constructed by any private power developer – has been connected to the national grid.

Sahas Power Company – the promoter of the 86-megawatt (MW) Run-Of-The-River (RoR) confirmed that the company has added the electricity to the national grid from February 7 as the test.

Chairperson of Sahas Power Company Him Pathak today shared that the electricity generated by the company has been connected to the national transmission line of the Nepal Electricity Authority (NEA) after successful test operation.

The river flow-based power project is connected to the 132 kVA Solu Corridor at the Lammane substation. The project is connected to the 132 kV transmission line by constructing a 13-km grid from Sahas Energy's powerhouse to Lammane. According to the promoter, the gross head of the project is 613 meters.

The water of Solukhola located in Soluddhukanda Municipality-11 has been diverted to Makubesi in Thulung Dudhkoshi Rural Municipality-3 through a 4,679-meter long tunnel and 1,938-meter long pipeline to generate 86-MW of electricity.

In October 2016, the company, which obtained a generation license from the Electricity Development Department, was entrusted with the construction of the civil sector by the Italian company CMCD Rivenna. But a new contract was called for after breaking the contract with Italian for not working according to the contract. After that, CE Construction took the contract and completed the civil works on time and the project was completed.

The hydro-mechanical contract of the project was taken by Machapuchchhe and Metal Work Sup and the electro-mechanical contract was taken by Vyth Hydro.

The construction of the 86-MW power project was completed at a total cost of Rs 13 billion with a total of 25 per cent of the founders and shareholders and 75 per cent of the bank's investment, under the leadership of Nepal Investment Bank – currently Nepal Investment Mega Bank – with some 10 banks. A consortium of 11 commercial banks, led by then Nepal Investment Bank has provided loan facilities of 73 per cent of the expected cost – of Rs 11.86 billion – to construct the project. The remaining 27 per cent investment is in the form of equity, the company added.

According to the company, the project consists of a simple weir with undersluice, side intake, gravel trap, approach channel, desalting basin, headrace tunnel, surge shaft, inclined pressure shaft and horizontal penstock tunnel, surface powerhouse and a tailrace canal.

The project utilizes a design discharge of 17.05m³/s from Solu Khola and the elevation difference between the proposed intake at Solu Khola and powerhouse at Dudhkoshi River for power generation.

Estimated to complete within September 2020 Solukhola Dudhkoshi Hydropower Project, is delayed due to Covid-19 pandemic.

JICA, Dolma Impact sign $10 million investment pact to aid growth

Japan International Cooperation Agency (JICA) today signed a $10 million investment agreement with Dolma Impact Fund II, focusing investments in renewable energy, technology and healthcare in Nepal.

The fund also contributes to gender equality and fulfills the criteria in the ‘2X Challenge: Financing for Women’, an initiative adopted by the G7 development finance institutions, including JICA, on the occasion of the G7 Leaders' Summit in June 2018, according to a press note issued by JICA and Dolma Impact Fund, jointly. 

According to Dolma Impact Fund, the project will contribute to sustainable development goals – Goal 5 (Gender equality), Goal 7 (Affordable and clean energy), and Goal 8 (Decent work and economic growth).

Chief executive officer of Dolma Impact Fund Tim Gocher, while addressing the signing ceremony in Kathmandu through the virtual medium, said Nepal would see a huge increase in foreign direct investments in the coming future that would create more jobs, prosperity and stronger industrial development.

The Dolma Impact Fund has $100 million under management and has invested in 12 companies across energy, healthcare and technology.

“Nepal needs more aid in hospitals, trained doctors and nurses and medicines manufactured domestically, so that the country can support itself in a future crisis,” Gocher said, adding that Dolma is further investing in renewable energy apart from the existing 46.5 megawatt project (MW), with JICA. “We just do not promote and build renewable energy, we promote the capital markets too, so that more investors come into the sector.”

The Fund has invested in companies like CloudFactory, Fusemachines, Sastodeal, Upaya City Cargo, and Foodmandu. “About 15,000 employees have been created in companies that the Fund has invested in,” said Gocher.

“This is our first partnership with an investment partner in Nepal,” senior deputy director-general of the Private Sector Partnership and Finance Department of JICA Jin Wakabayashi said, adding that Dolma Impact Fund is a leading private equity fund and JICA is excited to partner with such a fund and contribute to the development of Nepal.

JICA has been supporting the Investment Board of Nepal to strengthen sources for investments, he said, adding that JICA has also been in technical cooperation for hydropower projects. “Recently, JICA has started a new technical cooperation project to support entrepreneurs in Nepal.”

JICA's investment will be mainly utilised for equity investment in healthcare companies, IT and digital companies, and renewable energy projects in Nepal. JICA’s investment is part of the final close of Dolma Impact Fund II, which brings the fund corpus to $71.96 million.

“Nepal is facing the challenge of a hollowing out of industry caused by the increased number of migrant workers, which, in turn, is due to a lack of promising domestic industries and job opportunities in Nepal,” the press note reads, adding that the fosterage of promising industries such as healthcare and the IT and digital sector, therefore, is urgently needed in Nepal. 

Dolma Fund Management contributes to the development of the stock market and the private equity fund market in Nepal.

Although Nepal experienced a temporary economic downturn due to the earthquake in 2015, the economy has revived since then and the country is now expected to graduate from the Least Developed Countries (LDC) category by 2026. On the other hand, Nepal is facing the

challenge of a hollowing out of industry caused by the increased number of migrant workers, which in turn is due to the lack of promising domestic industries and job opportunities in Nepal.

Therefore, the fosterage of promising industries such as healthcare and the IT/digital sector is urgently needed in Nepal, the press note reads. “In some areas, however, Nepal has a natural advantage, being blessed with abundant water resources and an economically viable hydropower generation potential estimated at around 42,000 MW. Hence, Nepal is expected to expand its renewable generation capacity to contribute to the reduction of greenhouse gas emissions in South Asia.”

DFM manages impact investment funds that promote industrial development, employment creation, and renewable energy development.

NEA stops exporting electricity to India

Nepal has stopped exporting electricity to India due to dry season.

Nepal Electricity Authority (NEA) has stopped export of electricity as it has stopped producing excess electricity due to the start of the dry season, confirmed NEA spokesperson Suresh Bahadur Bhattarai. 

“NEA is likely to stop exporting electricity until the 2023 monsoon” he said, adding that the NEA had been exporting electricity to India since May 15 through the Indian Energy Exchange Ltd. “NEA has sold electricity worth Rs 11 billion during this period.”

As the flow of water in the rivers is decreasing due to dry season, the production of electricity from hydropower stations – based on river flow – has also decreased forcing the state electricity monopoly to stop export. 

The NEA has, currently, received permission to export up to 409 megawatts (MW) of electricity produced by eight hydropower stations of Nepal to India.

Due to electricity exports to India Nepal has earned Rs 10.38 billion during the first five-and-a-half months. Nepal started exporting power to India this June. According to NEA, some 1.26 billion units of surplus electricity were exported to India, earning Rs 10.389 billion in revenue by mid-November. 

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.

Floods and landslides damages 26 hydropower projects, multiple road sections

 The floods and landslides triggered by incessant rainfall caused physical damage of around Rs 3 billion. It is estimated that the under construction 44 MW Super Madi Hydropower Project in Madi of Kaski alone has caused a loss of over Rs 1 billion, according to Independent Power Producers' Association (IPPAN).

The rainfall induced floods damaged 16 under construction projects and 10 projects generating electricity, the IPPAN confirmed, adding that more than two dozen hydropower projects were affected till 8 PM today.

"Most of the hydropower projects -- both under construction and completed -- in the Dordi Corridor, Marsyangdi Corridor and Madi Corridor have been affected by the floods and landslides," the IPPAN informed, adding that the details of the damage have not been received from all the places yet. "Thought there has been a lot of physical damages, no immediate reports of injuries or human casualties have been reported."

Construction materials, equipment, dams, tunnels and other structures of the hydropower projects under construction have been damaged due to the landslide, it adds.

The floods and landslides also damaged more than two dozen roads and more than a dozen bridges have collapsed in various places.

The Department of Roads (DoR) confirmed that most of the damage has been reported on Karnali Highway and Siddhartha Highway causing a loss of billions. "There still obstruction in 8 road sections till 8 PM today, and one-way transportation services came into operation in 11 places and two-way in three places of the blocked highway."

Nepse hits yet another record

 The Nepal Stock Exchange (Nepse) index today reached yet another all time high to 2,820 points as it gained by 32.81 points today from last Thursday's closing.

Likewise, the sensitive index increased by 8.23 points to close at 507.20 points, according to the Nepse. "The volume of total transactions stood at Rs 11.60 billion as over 25 million units of shares of the total 220 companies were traded on the first trading day of the week. This is second only to the highest turnover of Rs 11.96 billion created last week.

Likewise, Nepal Reinsurance Company has the highest individual scrip turnover of a little over Rs 418.60 million, when over a dozen scrips have technically closed at the upper limit of 10 per cent gain today. Ru Ru Jalvidut Pariyojana Limited (RURU), however, lost the most of 3.73 per cent. 

The development banks sub index gained an impressive 7.54 per cent while finance sub index gained an equally magnificent 6.76 per cent but microfinance sub index lost the most 0.37%.

The share price of Sangrila Development Bank increased by 9.93 points while United IDI Mardi Hydropower 9.93 points, Kalika Power Company 9.86 points, Best Finance Company 9.85 points, Goodwill Finance 9.85 points, Saptakoshi Development Bank 9.84 points and Barun Hydropower 9.84 points.

IBN approves Rs 39 billion worth investments for hydel projects

 The Investment Board of Nepal (IBN) – chaired by Prime Minister KP Sharma Oli today – approved a total of Rs 38.68 billion worth of investments for three hydropower projects with a total capacity of around 200 megawatts (MW).

The 45th meeting of the board decided to approve investments worth Rs 38.68 billion for three hydropower projects that will be built on public private partnership (PPP) modality, according to a press note issued by the board.

The hydropower projects getting the approval from the Investment Board are 77.5 MW Ghunsakhola Hydropower Project (Rs 17.62 billion), 57 MW Himchuli Dordi Hydropower Project (Rs 10.62 billion) and 65 MW capacity Dudhkhola Hydropower Project (Rs 10.44 billion), the press note reads, adding that 

At the first meeting – after the government appointed Sushil Bhatta as its new chief executive officer in August – the Prime Minister also said that the board meeting could not be held regularly due to Covid-19. 

He also assured to continue the meeting regularly. The board – on the occasion – also welcomed newly appointed finance minister Bishnu Paudel as the board vice chair today.

AEPC, NEA seal a deal to construct mini-grid

 Alternative Energy Promotion Centre (AEPC) and Nepal Electricity Authority (NEA) signed an agreement to construct a mini-grid with a capacity of 1.624 megawatts (MW) connecting micro and small hydroelectricity projects unreached by the national grid.

AEPC’s executive director Madhu Sudan Adhikari and NEA Engineering Company director and NEA deputy manager Hitendra Dev Shakya, recently signed the agreement on behaf of their respective institutions. 

The NEA Engineering Company and the AEPC signed the agreement aiming at carrying out the detailed feasibility study for the construction of a mini-grid by connecting the seven micro and small hydel projects being developed in Jumla of Karnali Province, a press note from the NEA reads.

The company will carry out the detailed feasibility study as well as the engineering design of the mini-grid project, the press note reads, adding that the AEPC will bear the financial cost. “Under the project, six projects developed with the AEPC’s grant assistance and one developed with NEA’s support will be connected to the mini-grid which will, in turn, be connected to the National Transmission Line.”

The 200-kilowatt (KW) Ghughuti Small Hydroelectricity Project at Chandannath Municipality in the district headquarters is constructed with the NEA assistance, whereas the 200-KW Girikhola Small Hydroelectricity Project at Tatopani Rural Municipality, the 100-KW Juwanadi Thinkebandh Micro Hydroelectricity Project at Chandannath Municipality and the 45-KW Triveni Micro Hydroelectricity Project at Patarashi Rural Municipality are being constructed with the assistance of AEPC.

Similarly, the 31-KW Luma Micro Hydroelectricity Project, the 50-KW Dillichaur Micro Hydel Project and the 198-KW Chukeni Khola Small Hydroelectricity Project are developed with AEPC support. 

Financial closure of Seti Nadi Hydroelectric Project

 NMB Bank has successfully completed financial closure of Seti Nadi Hydroelectric Project.

The project – with an installed capacity of 25 MW – is being developed by Vision Lumbini Urja Company. The project – located at Machhapuchchhre Rural Municipality and Pokhara-Lekhnath Metropolitan City, Kaski, Gandaki Province – is estimated to cost Rs 5 billion, out of which Rs 3.50 billion has been managed by the consortium debt.

The financial closure agreement was signed today with lead financing from NMB Bank and Employees Provident Fund (EPF) and Agricultural Development Bank as member bank and financial institution, according to a press note issued by the NMB Bank. “Nepal Electricity Authority (NEA) has already signed power purchase agreement (PPA) with the company.”

NMB Bank now has a total number of 43 projects in its hydro portfolio, the press note adds.

New IFC report urges companies to take action to boost women’s contribution in the hydropower sector

 Companies and women in Nepal would stand to benefit, if greater action were taken to improve women's participation in and contribution to the hydropower sector, a study carried out by the International Finance Corporation (IFC) – a member of the World Bank Group – reads.

The study of 20 companies is part of the Powered by Women initiative — a time-bound commitment by companies to build the business case for improved gender equality and diversity in renewable energy companies in Nepal. 

The study – released today – was conducted between 2019 and 2020. Over two dozen executives and almost 250 employees working in 20 companies within Nepal's hydropower industry contributed to the research. “Women make up more than half of Nepal's population, yet the study reveals only 10 per cent of all employees in the country's hydropower sector are women," IFC country manager for Nepal, Bangladesh and Bhutan Wendy Werner has been quoted by the IFC in a press note. “Companies need to seize the opportunity to embark on more gender-sensitive and family-friendly policies to help boost staff productivity and attract and retain talent which will ultimately boost their businesses.

“We recognise the need to make conscious efforts to increase the number of women in the power sector,” vice president of Independent Power Producers' Association of Nepal (IPPAN) Ashish Garg said, adding that his organisation has already taken a forward step by making women participation in the executive committee mandatory. “By partnering with IFC on this important initiative, we are committing to championing this cause.”

The study also recommended that companies need to develop and enforce gender-sensitive policies, including mechanisms to address cases of bullying, sexual harassment, abuse and exploitation. More tailored programmes to support professional development opportunities for women, such as more robust recruiting efforts directed at women's advancement into leadership positions and targets for diversity in board representation, are also encouraged.

Meanwhile, at the community level, the study has urged increased support from companies to women-led businesses, including improving their access to finance, and efforts to train women in non-traditional roles within the sector.

The study – spearheaded by IFC's Hydro Environmental and Social Advisory team in partnership with the governments of Australia, Norway and Japan – has shown very few of those employed are in leadership positions, included in corporate boards or occupy non-traditional roles in the hydropower sector.

Despite the considerable scope for women to take up non-traditional roles in the hydropower sector, we found that most companies in Nepal have not yet initiated adequate efforts to realise this,” Asia Environment and Social Governance Team Leader for IFC Kate Lazarus has been quoted in the press release as saying. “While some companies, particularly those led by women entrepreneurs, do show willingness in this regard, there are still challenges in transforming that intent into action on the ground.”

The report has identified gender stereotyping, remoteness of hydropower project sites and a lack of women in science; technology, engineering, and math education as key constraints for women's participation in this sector.

Concerns around initial investment costs and uncertainty over whether there will be a payoff in the short- to medium-term were also inhibiting factors, according to the study. Nepal ranks 105 out of 149 countries on the Global Gender Gap Index 2018 conducted by the World Economic Forum (WEF), indicating that there is still a critical need to focus on gender equality across various spheres.

KEY TAKEAWAYS:

At present from a study of 20 companies, only 10 per cent of total employees in Nepal’s hydropower sector are women, and very few of those employed are in leadership positions, included in corporate boards or occupy non-traditional roles in the industry;

• Various constraints continue to impede women’s entrance into this traditionally male-dominated sector – gender stereotyping, lack of gender-sensitive policies and practices, remoteness of hydropower project sites and a general lack of women in science, technology, engineering, and math education

• Adopting targeted and tailored interventions to advance gender diversity and equality have demonstrated net positive impacts in terms of business growth, efficiency and sustainability around the world

• At the corporate level, companies are recommended to: adopt policies to improve gender equality and equal treatment for all staff, create more career development opportunities targeted at women, build awareness on gender bias and set targets for diversity in board representation and leadership

• These corporate policies should also extend to the project level, where more gender specialists and female staff should be deployed to the field, more emphasis on collection of gender-aggregated data, and investment in opportunities for women to develop skills in non-traditional roles

• At the community level, companies should incorporate gender-responsive facilitation and techniques and gender equality tools, strengthen GBV-related reporting mechanisms, support women-led businesses and explore partnerships to train women in non-traditional roles

Nepal Army plans to expand investment portfolio

Despite criticism for being involved in commercial activities, Nepal Army seems to have been expanding business more without any hesitation.
According to a draft bill for the revision to the Nepal Army Act, it wants to get legal clearance to invest money from its welfare fund in business activities ‘as a promoter’ as it has been lobbying for last few years. “We have submitted the draft to revise the Nepal Army Act (2006) to the government on July 16,” confirmed Judge Advocate General Ranta Prakash Thapa, who is in charge of the Army’s legal department.
“We are expecting that their draft bill soon gets government approval before it goes for parliamentary ratification,” he said, adding that the current Act bars Nepal Army from investing in business enterprises, companies and infrastructure projects like hydropower. “After receiving the draft bill, the Defence Ministry has formed a committee comprising officials from Defence and Law ministries and the Army to study it.”
The Defence Ministry will take a decision about the bill – that seeks revisions to different clauses including the one related to the investment of money from the welfare fund – based on the recommendations from the committee. The draft bill needs an approval from the cabinet before it is tabled in the federal parliament for endorsement.
Nepal Army has been eyeing investments in hydro projects and in the Treasury Bill, which will provide more returns than the interest that banks pay. Though, the bill is yet to be approved, Nepal Army has already approached the Department of Electricity Development, seeking to invest in the 25 MW Dudh Khola and 32 MW Bhimdang Khola hydropower projects.
Currently, Nepal Army has invested is in gas stations, schools, medical colleges and emulsion plants, apart from selling bottled water, but it wants to spread its wing, despite criticism from the different quarters of society.
Though, its primary role is to ensure the national security, the Nepal Army has been increasing interested in commercial activities, which has time and again, tarnished its image, according to the security experts, who are much worried about the Nepal Army’s inclination to business rather than limiting itself to its primary role of ensuring national security, gathering intelligence, protecting national parks and natural reserves and saving people during the times of disaster. “The more the Army is involved in non-military activities, the more it will get weakened professionally.”
Nepal Army was used in development activities by the then king Birendra Bir Bikram Shah, as he thought that the Army has become idle due to his ‘Zone of Peace’ proposal for Nepal. Birendra had proposed Nepal be declared ‘Zone of Peace’, which means the country would not need a big Army.
Likewise, the Army was involved in building roads during the conflict. Slowly, Nepal Army then started to getting involved in contracts for various projects. Currently, the incumbent government has also contracted Nepal Army for constructing the Kathmandu-Tarai expressway, which has also been criticised. 
The Army, however, denies that its involvement in several projects is ‘commercial venture’. But the Nepal Army ‘welfare fund’ has to invest on various projects to give good returns to the depositors.
Constituted in 1975, the Army’s welfare fund currently has cash deposits of Rs 45.86 billion in different banks and financial institutions, apart from an investment of Rs 5.74 billion in different ventures. Every year, it has been adding billions, as the interest and the contribution from those, who are deployed in United Nations (UN) peacekeeping missions, to its coffers. It witnessed an increment of Rs 7.29 billion in its welfare fund in the last fiscal year alone, according to the Nepal Army press note issued today.
The Army wants to expand the business also to ‘expand its welfare fund’, claimed Thapa, in the press meet. “Bank interest is not a sustainable source of income,” he said, adding that the Army wants an investment in the projects that give high return. “The draft bill proposes provisions that would allow the Nepal Army to invest in projects ‘only after the government’s approval.’
Nepal Army has also been criticised, recently, for leasing out a new building it has constructed in Mahakal, in the prime location, to replace the earthquake-damaged Tri-Chandra Military Hospital that was constructed with the help of Britain in 1925 in memory of 20,000 Nepalis, who were killed in Europe in the First World War. The Army had demolished the 85-year-old neoclassical structure to rebuild a new hospital, and leased out for commercial purpose, which has been criticised by almost everyone blaming Nepal Army that it is turning into ‘corporate army’, and the combination of ‘gun and money’ is going to be more lethal weapon against democracy and federalism in the long run.

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.

Economy to shrink to 5.3 per cent

Economy is anticipated to shrink to 5.3 per cent (at market prices) in the current fiscal year 2019-20, down from 7.1 per cent a year earlier, according to the Asian Development Outlook (ADO) 2020, the Asian Development Bank’s (ADB) annual flagship economic publication.
“The global outbreak of the COVID-19 pandemic and subsequent nationwide lockdown that is necessary to contain the contagion will adversely affect the economy,” said ADB country director for Nepal Mukhtor Khamudkhanov. “Industry and services face supply disruptions,” he said, adding that remittances will likely decline during the last quarter of this fiscal year, dampening domestic demand. “Growth will also be slower as a result of lower rice production.”
If the situation due to the COVID-19 pandemic further worsens, growth could be lower than currently anticipated, he added.
Before the Covid-19 pandemic, ADB had forecast a 6.3 per cent growth while the government had aimed for an ambitious target of 8.5 per cent. While the bank has made necessary revisions taking the pandemic into account, the government is yet to revise its growth forecast.
According to the Nepal Macroeconomic Update, which is released today, average annual inflation will inch up to 6 per cent, up from 4.6 per cent a year earlier, reflecting lower production and supply chain disruptions due to the COVID-19 pandemic. “Headline inflation has averaged 6.5 per cent in the first seven months of the current fiscal year, significantly higher than 4.2 per cent a year earlier,” the report reads, adding that food inflation increased by 9.8 per cent as of mid-February 2020 compared to a year earlier, with significant increase in the prices of vegetables, spices, and alcoholic beverages. “The temporary closure of international borders over COVID-19 concern has nudged up food prices.”
The average annual inflation for the current fiscal year could be higher than anticipated, if the situation further worsens due to the Covid-19 pandemic, adds the report.
Likewise, merchandise trade deficit narrowed by 4.9 per cent year-on-year in the first seven months of the current fiscal year after widening by 15 per cent in the year-earlier period. The deficit contracted on higher export growth, particularly of palm oil and cardamom to India and reduced import of construction materials, vehicles, and petroleum products. The improved trade balance has helped contain current account deficit to $1 billion in the fiscal year through mid-February 2020 from $1.5 billion in the corresponding period a year earlier. The deficit is forecast to narrow from 7.7 per cent of gross domestic product (GDP) in the last fiscal year to 5.4 per cent on shrinking imports of petroleum products, capital, and consumer goods. However, it could be higher if remittances fall substantially in the last quarter of the current fiscal year.
ADB, however, projects Nepal’s GDP to recover at 6.4 per cent for the next fiscal year 2020-21, assuming a quick end to the Covid-19 pandemic, a return to pre-Covid economic activities, and a normal monsoon. The government of Nepal expects a couple of large infrastructure projects, namely the 456-megawatt (MW) Upper Tamakoshi Hydroelectric Plant and Gautam Buddha International Airport, to be commercially operational by the next fiscal year 2020-21, the report reads, adding that expectation of higher subnational level spending will also stimulate growth.
Average annual inflation will stay moderate at 5.5 per cent in the next fiscal year 2020-21, assuming a reversal to normal activities after the Covid-19 disruption, better harvest, subdued oil prices, and a modest uptick of inflation in India. The current account deficit is expected to widen from 5 per cent of GDP in the current fiscal year to 5.6 per cent – next fiscal year – as imports of capital goods increase. The deficit will, however, be largely contained by lower oil prices, a gradual reduction in the import of fossil fuel with better electricity supply, and higher hydroelectricity exports to India, according to the report.
Downside risks to the outlook in the next fiscal year 2020-21 are the pervasiveness of the Covid-19 pandemic that could paralyze the economy, if the outbreak persists. Natural hazards like erratic monsoons and flood could depress farm output and damage infrastructure. Persistent capacity deficiencies regarding project and program execution at the provincial and local levels will weaken subnational spending, the report reads, adding that exogenous shocks such as the Covid-19 pandemic will weaken global demand, affecting out-migration for foreign employment and putting pressure on Nepal’s external stability.

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.

IBN approves Rs 85 billion investment for three hydro projects

The government today approved foreign investment worth almost Rs 85 billion for three hydropower projects.
The 42nd meeting of Investment Board Nepal (IBN) today – chaired by Prime Minister KP Sharma Oli – has approved foreign direct investment (FDI) for 216-megawatt (MW) Upper Trishuli 1, 50 MW Marshyangdi Besi and 37 MW Upper Trishuli-3B, confirmed IBN chief executive officer Maha Prasad Adhikari.
“While the IBN has approved Rs 65 billion investment for Upper Trishuli 1, Rs 11.77 billion has been approved for Marshyangdi Besi and Rs 8.22 billion for Upper Trishuli-3B,” he said, adding that the meeting has also extended the term of compensation dispute committee of the 900 MW Arun-III hydropower project that is looking into various issues and asked it to resolve them within two months.

Central bank directs BFIs to provide easy loans for EV charging stations

The central bank has directed banks and financial institutions (BFIs) to give priority in issuing loans to establish charging stations for the promotion of electric vehicles (EVs).
The central bank – issuing a directive to BFIs,, which has given priority in lending for charging stations for EVs as a priority area for disbursing loans in line with the government move to increase electricity generation and simultaneously increase the use of electric vehicles too – directed the BFIs to accord priority to providing loans for the construction of charging stations as hydropower is a renewable energy and will play a vital role in the public transport sector.
The government is aiming at increasing the volume of electric vehicles across the country by 30 per cent within the next 10 years. Meanwhile, Nepal Electricity Authority (NEA) has also started the process to construct 50 charging stations in Kathmandu valley and along major highways.
Earlier, Ministry of Energy, Water Resources and Irrigation had – on August 29 – also drafted guidelines to set up more than 200 EVs charging stations to prioritise EVs to maximise the use of electricity.
According to the ‘operational guideline of electric vehicle and establishment of charging stations’, the NEA will be responsible for giving approvals to set up charging stations, ensure uninterrupted power supply and monitor their security and leakage. “The power utility will also be responsible for determining service charge, testing and authenticating the charging stations.”

Upper Bhotekoshi starts commercial production

The 45-megawatt (MW) Bhotekoshi Hydropower Project has finally restarted commercial production from today.
The project – based in Sindhupalchowk – started commercial power generation following the two-week-long test transmission. The project had successfully conducted the latest test transmission on December 7. The power generated from the project has been connected to the national grid through the Lamosanghu-based substation.
Though, it had been previously commissioning energy since January 2001, the project had been closed after the 2015 devastating earthquake and floods and landslides completely damaged the project.
The project – developed and operated by the private sector – is currently in the position of not operating to its full capacity due to low water flow in the river at the time. The current production on average is 22-25 MW each day. After the water level rises we will able to operate in a full-fledged manner.
The powerhouse of the project is based in Jhirpu of Phulpingkatti of Bhotekoshi village municipality. The Chinese Company Sinohydro Bureau 11 had been awarded the project contract in 2074 BS at the cost of Rs 7 billion.

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.

Government seeks UK investment in energy, roads

Appraising the newly appointed British envoy on Nepal’s development agendas, state of country’s economy, improved tax and revenue administration and the country’s trade status with the international market, finance minister Dr Yuba Raj Khatiwada today urged the United Kingdom to invest in Nepal.
During a meeting with the newly-appointed ambassador of UK to Nepal Nicola Pollitt today at the ministry, he also sought UK investment in Nepal in hydropower, tourism and road projects. “Nepal could be a good place for the UK government and British investors to invest as Nepal has seen improvement in business environment,” he said, adding that the UK is a good market for Nepali products. “Nepal intends to expand trade relationship with the country.”
The two countries will soon ink a pact on double taxation avoidance on goods,” he said, adding that the government will facilitate trade and investment to and from the UK.
He also mentioned that tourism, hydropower and roads sectors in Nepal had high investment potential and urged the British government to help Nepal enhance its trade sector. Khatiwada also urged the UK government to help Nepal promote tourism and increase the inflow of tourists from the UK to Nepal.
Pollitt, on the occasion, said that her priority during her tenure will be to further enhance bilateral and trade relationship between Nepal and the UK.
Claiming that Nepal has achieved political stability, she said promised to extend support to Nepal in the coming days based on Nepal’s priority and development goals.