86% OF HYDROPOWER LICENSES WITH INDIAN COMPANIES

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    Indian promoters lead those holding license without developing hydropower projects. The Energy Ministry has issued license for projects with combined installed capacity of 6022 MW and Indian promoters hold license for projects with capacity of 5157 MW out of that. It is 85.6 percent of the total number of licenses issued.

    Construction of just the 82 MW Lower Solu, developed jointly by Esser Group and Nepali investors, has started out of that. The others have applied at the Department of Electricity Development (DOED) for generation license. The other projects are stuck in preliminary works. Many have prepared detailed project reports (DPR) and applied for license while others have applied to sign power purchase agreement (PPA) with the Nepal Electricity Authority (NEA). Many Indian companies have applied for PPA in US dollar, according to the NEA.

    Many Indian companies started to acquire license for hydropower projects after the first energy conference was held in Nepal in 2006. The number was low, and that of Indian companies still lower, earlier due to the Maoist conflict. Licenses of a few big Indian investors including Jindal Power Limited have been revoked after finding that they did work after acquiring license.

    GMR Upper Karnali Hydropower Limited and SJVN Arun III Hydropower–promoters of Upper Karnali and Arun III, both of 900 MW, respectively being moved forward through the Investment Board Nepal (IBN)–have been set a deadline to make investment arrangements by coming September and January respectively. The government had awarded Upper Karnali to GMR eight years ago and Arun III to Satluj Jal Vidyut Nigam (SJVN) Limited through free competition after they offered to provide more free energy and equity. The promoters have already signed project development agreements (PDA) with the IBN to develop these projects.

    GMR still is looking for partners to invest. Discussions have already been started with the Asian Development Bank (ADB), International Finance Corporation (IFC) and European Investment Bank (EIB) to invest in Upper Karnali. Similarly, SJVN has said it will bring investment from Power Finance Corporation and Punjab National Bank, but has yet to sign loan agreements. Nepal representative of SJVN Hariram Subedi said understanding has already been reached with the bank, and loan agreement will be signed soon.

    Bhilwara Energy Limited had taken license for 120 MW Likhu 4 and 50 MW Balefi projects over a decade ago. It had applied at the DOED over three years ago to downsize Likhu 4 to 52 MW after failing to make investment arrangements but capacity of the projects has yet to be reduced. Bhilwara had signed a fall-back PPA with NEA for some time for consumption of the generated electricity in Nepal but the PPA is no longer valid. The project is stalled now.

    Similarly, Patel Engineering Limited had acquired survey license for 130 MW Budi Gandaki A and 260 MW Budi Gandaki B long time ago. But it has also not started work citing market and other financial and technical problems. Assistant manager of the project Ananda Chaudhary said the project could not move forward as it has yet to sign PPA with the NEA despite applying for one in US dollar after completing DPR.

    KSK Energy Limited of Energy has acquired license for 400 MW Tila I and 420 MW Tila II. KSK is now trying to make investment arrangements by signing PPA in dollar. Nepal representative of the promoter company Harish Chandra Sah said the project will move forward after signing PPA. He argued that the project could not move forward due to problems like volatile political situation in the country and lack of policy about dollar PPA. “Foreign banks and financial institutions are reluctant to invest in Nepal due to high political risks. This has affected those acquiring license,” he reasoned.

    Essar has started construction of Lower Solu after signing PPA. It has borrowed from foreign banks. Essar Power has also received license for 180 MW Kali Gandaki-Kowan but has not been able to move the project forward. Around half a dozen promoters of those that have acquired generation license until now have started to look for partners unable to make investment arrangements on their own. There is currently liquidity crisis in the Indian banking sector. The main problem for hydropower projects is investment. Many companies that have acquired generation license in Nepal have not even been able to arrange 25 percent equity as hydropower projects require big investment.

    Spokesperson at the Energy Ministry Joint Secretary Dr Sanjay Sharma said the majority of Indian companies have not worked even after acquiring license. “All the promoters have prepared DPR and applied for PPA. The promoters have got a pretext to hold license also as we have failed to do some work. The Energy Crisis Alleviation Action Plan will now resolve the problems,” he claimed. He added that the government has not been able to revoke license due to a few clauses of the Electricity Act. The concept paper for energy development decade brought by the government has provision for dollar PPA for 10 years for the projects to be developed with foreign investment.

    Two projects with Chinese investment nearing completion

    Government-owned Chinese companies have acquired license for three projects and two of them–50 MW Upper Marsyangdi A and 25 MW Madi–are nearing completion.

    Sino Hydro Corporation of China and Koi Group of Chitwan are developing Upper Marsyangdi A, and China Water and Electric Corporation is developing Madi. Similarly, construction of the 750 MW West Seti has also moved forward through the IBN. The project will be developed with joint investment of China Three Gorges International and the NEA.

    Source : Karobar Daily