11 hydro projects stalled as NEA refuses to do PPA


    KATHMANDU, Aug 7

    nea_cartoonEleven hydropower projects with combined installed capacity of 903 MW have been stalled in lack of Power Purchase Agreement (PPA) with the Nepal Electricity Authority (NEA). The promoters plan to invest Rs 156 billion on them.

    NEA has been dallying in signing PPA stating that these projects will not address the acute energy crisis during the dry season as all of them are of the run of the river types. NEA has not signed PPA with these projects based on its assumption that surplus electricity will be wasted during the monsoon season six years down the line and it will face annual losses of billions. The promoters complained that NEA is now bothering them stating that recommendation of the Energy Ministry is necessary to sign PPA. Kali Gandaki Kovang (180 MW) developed by Ambeshwor Engineering Hydropower Company, Budi Gandaki A (90 MW) and Budi Gandaki B (207 MW) by Naulo Nepal Hydroelectric Company, six projects under Super Six (210 MW) Projects, and Upper Trishuli 1 (216 MW) by Nepal Water and Energy Development Company have been stopped in lack of PPA.

    The promoters are accusing that NEA is refusing to sign PPA citing loss of surplus energy during the monsoon even when the country is facing daily load-shedding of 14 hours during the dry season. They claimed that additional domestic and foreign investment will not arrive in the sector due to problem of market for the generated electricity if NEA does not sign PPA with these projects. NEA is the state electricity monopoly that generates, transmits and distributes electricity in Nepal. Promoters of big projects have started to apply for PPA in recent times after completing Detailed Project Reports (DPR) and Environmental Impact Assessment (EIA). Promoters are preparing to make financial arrangements after signing PPA. Banks only lend money after the market for electricity to be generated is ensured.

    Manager of Budhi Gandaki  A and B Ananda Chaudhary said the company will start construction making financial arrangements immediately after signing PPA. He said DPR and EIA of these projects have already been completed. The estimated cost of these two projects is around Rs 42 billion. He said the Standard Chartered Bank in India has already given letter of intent to the promoter Patel Engineering Limited of India to invest in the projects. The company has now sought permission from the government to export the electricity to be generated from these two projects to India. Budhi Gandaki  is expected to generate 640 million units of electricity annually and B 1.39 billion units. “We do not wish to export to India. But there is no alternative to exporting electricity after NEA has refused to buy. We have, therefore, sought government permission,” he added. Survey license of both these projects have expired in July. Clause 5 of the Electricity Act clearly mentions that the validity of a survey license is five years at the most. The company claimed it has already spent Rs 300 million in preparing DPR and EIA till now. It aims to complete the projects by 2018 if PPAs are signed in time. It said that these projects are financially viable due to its proximity to the main load center Kathmandu.

    Kali Gandaki Kovang, developed with joint investment of Indian, American and Nepali investors, has also been stalled in lack of PPA. NEA has provided letter of intent for connecting electricity to the project that is being developed through Ambeshwor Engineering by Essar Power Limited of India, Green Venture International of USA and Nepali investors. The company’s feasibility study has put the project cost at around Rs 40 billion. “The company has already invited international bids for civil construction. Construction will start immediately after signing PPA with NEA,” Senior Manager of the project Arun Rajouriya stated. The company plans to complete the project in five years. He claimed that the company has already spent Rs 1 billion for study. The company has applied with the Department of Electricity Development (DOED) for generation license.

    He revealed that the promoter company will make share investment of Rs 12 billion while the European Union Bank (EUB) and the Asian Development Bank (ADB) will provide loans for the remaining Rs 28 billion.  He said EUB and ADB have agreed to invest immediately after signing of PPA. He revealed the company had planned to construct it as a 400 MW project but was later designed for 180 MW after NEA refused to give permission for 400 MW. The project is expected to generate 953.50 million units annually. The company has already submitted DPR to the government and completed drilling for the project.

    Similarly the Super Six projects handed over by the government to the highest bidding private companies have also been stalled in lack of PPA. PPA for these projects have not been signed yet despite instruction of the then Prime Minister Baburam Bhattarai. NEA has now formed a committee under board member Laxman Agrawal to make recommendations for PPA. Though the six projects were scheduled to be completed by the end of 2015, they will now be delayed due to the delay in signing of PPA. The six projects are expected to cost over Rs 30 billion. NEA has also not signed PPA with Trishuli 1 project to be constructed in partnership of South Korean and Nepali investors at an estimated cost of over Rs 40 billion. The government had issued license to Nepal Water Development Company in condition of signing PPA and making financial arrangements within one and half years. The license will automatically expire if PPA is not signed and financial arrangements not made.

    NEA signs PPA at the same rate for projects of up to 25 MW and one with bigger projects through mutual agreement with the promoters. The NEA board, meanwhile, has taken back the authority of signing PPA with projects of up to 25 MW to the board from the executive director. Director of the Power Trade Department of NEA Sher Singh Bhat said the process of signing PPA has been stopped for now as NEA is preparing a model PPA. “The model PPA will determine how PPA with the projects over 25 MW will be signed, and we will do accordingly once it comes into implementation,” he added.

    Source : Karobar Dailly