Both Modi projects to be developed jointly


    KATHMANDU, Aug 4

    upper_modi_K_waterThe South Korean company Korea Water Resource Corporation (K-Water) and the Nepal Electricity Authority (NEA) have agreed to construct both Upper Modi and Upper Modi A projects  through a single structure in cascade format with an installed capacity of 62.5 MW.

    Agreement has been reached to move the projects forward as per the feasibility study report prepared by K-Water that had recommended to construct the projects in cascade format with installed capacity of 20.5 MW for Upper Modi and 42 MW for Upper Modi A. The study has put project cost at over Rs 12 billion (US$ 124.50 million). K-Water has stated in the report that soft loans will be required to make both the projects financially viable. It has also started the process of taking loans from the Asian Development Bank (ADB) and Export Import (Exim) Bank of Korea. The project will move forward after receiving letters of intent from ADB and Korean Exim Bank who have already given consent in principle. K-Water will invest 30 percent, NEA 60 percent, and the rest 10 percent will be collected from the general public for the project with 60 percent of loan and 40 percent equity investment.

    There were preparations earlier to construct the projects separately. NEA and K-Water have agreed to form a joint company, which will be established after permission by their respective boards, to move the project forward. The power purchase agreement (PPA) will be signed after that. K-Water has submitted a working plan to start construction of both the projects in 2017 and complete construction in four years (2020). It has proposed to start civil construction from 2017 after completing financial closure, PPA, land acquisition, environmental impact assessment and other preparatory works before that.

    NEA and K-Water had signed Project Development Agreement (PDA) in April, 2011 with K-Water agreeing to invest 80 percent in the project and NEA 20 percent at the time. But K-Water has since rearranged the investment structure saying it will invest 30 percent, NEA 60 percent, and the rest 10 percent will be collected from the general public after the project did not turn out to be financially attractive following feasibility study.  K-Water decided to reduce investment after the feasibility study, done jointly with NEA, showed that the generated electricity should be sold at a minimum rate of 8.50 cents or around Rs 8 per unit to take loans at commercial interest rate. The project required soft loans after NEA stated that it cannot pay more than 6.50 cents (around Rs 6) for every unit.

    The project lies in Parbat and Kaski districts. An 11-kilometer dirt road to the project site has already been completed while environmental study has also been completed and permission from the bodies concerned also received.

    Source : Karobar Daily