Billions to flow in for hydel if sector reformed

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    KATHMANDU, MAR 08 –

    hydro_artNepal’s hydropower sector could receive US$5 billion assistance from the World Bank Group alone if the government shows seriousness about carrying out reforms in the energy sector.

    This was revealed by Finance Minister Ram Sharan Mahat on Friday during a budget review meeting held at the Finance Ministry. Mahat said that the World Bank has indicated its willingness to inject $5 billion within the next few years for Nepal’s hydropower development stating that there will be no dearth of resources for hydel development if Nepal reforms the sector.

    Some of the reforms the donors have sought are issuance of local currency bonds, restructuring of the Nepal Electricity Authority, power trade agreement with India and signing of power development agreement (PDA) with three foreign power developers. “If these major reforms are taken, billions of dollars will flow in the energy sector not only from the donors but also from the private sector,” Mahat said.

    According to World Bank/IFC officials in Kathmandu, the World Bank Group is ready to support Nepal for the generation of 3,000MW electricity. They say that the onus now lies in the government to capitalise on the donors’ enthusiasm.

    Donors’ willingness to support Nepal to harness its hydropower potential is not new. However, with the formation of the new government, there is renewed interest on the part of donors. International Finance Corporation (IFC), the private sector funding arm of the World Bank, recently organised a national dialogue titled ‘Nepal hydropower: from potential to reality’ in the Capital where concerned stakeholders discussed the impediments in hydropower development and the way forward.

    The two-day event had participation of leading donors, international investors along with energy secretaries from India and Bangladesh. According to the IFC, the event was organised to tap the momentum that has given a hope of political stability following the formation of the new government.

    During the event, the concerns of donors and international investors were almost the same. Government officials tried their best to assure both, saying that there is urgency also on the part of government for reforms.

    Nepal Rastra Bank Governor Yuba Raj Khatiwada has promised that directives on local currency bond would be issued within two weeks. The IFC, which has long planned to issue Nepali rupee bonds to invest in Nepal’s infrastructure projects, including hydropower, has applied to the Ministry of Finance for permission to issue the bonds.

    Once the government okays its proposal, the IFC will be able to raise the money required by the private sector for investment in development projects within the country.

    The IFC, which has already issued such bonds in 30 countries, is interested to do so in Nepal. The IFC plans to issue bonds worth around $500 million.

    On the issue of the PDA, government officials say it will be done within a month. Three foreign power developers—GMR Energy, Satluj Jal Vidyut Nigam Limited and SN Power—are currently negotiating with the Investment Board for the PDA.

    Source : The Kathmandu Post