BPC refuses to decrease PPA rate for Kabeli-A



    Kabeli-A-ProjectButwal Power Company (BPC), the developer of the 37.6 MW Kabeli-A Hydropower Project, has refused to revise the power purchase agreement (PPA) for the project’s increased capacity of 7.6 MW.

    The Ministry of Energy (MoE), acting upon instructions from the Cabinet, had asked BPC to consider decreasing the PPA rate for its added capacity two weeks ago. The PPA defines the price at which BPC will sell power to the government after the project comes online.

    The Cabinet had asked the MoE to renegotiate with BPC for a reduction in the PPA rate after the project was upgraded to 37.6 MW from 30 MW.

    Although the MoE and BPC had settled all the issues including the PPA rate while increasing the project’s capacity, the Council of Ministers had told the ministry to arrange a fresh deal. Responding to the ministry’s letter a week ago, BPC said it could not agree on decreasing the PPA rate as all the topics had already been settled.

    “The project’s financial health will be affected if the PPA is revised,” BPC wrote to the ministry. “It will make the project unfeasible.” BPC vice-president Prateek Pradhan confirmed that his company had refused to reduce the PPA rate.

    A high-level BPC official criticized the MoE for not being able to convince the Cabinet that the deal had been settled and could not be changed. A ministry official admitted the weaknesses of the MoE in not being able to communicate properly with the Cabinet.

    A committee led by Dilli Bahadur Singh, joint secretary at the Water and Energy Commission Secretariat, had conducted the negotiations and settled the financial matters including the PPA rate. After the discussions, the PPA rate had been fixed at 6.21 cent per unit.

    The Nepal Electricity Authority will pay 60 percent of the bill in US dollars and 40 percent in Nepali rupees as per the accord. The payment in local currency will be calculated on the basis of the exchange rate of the US dollar at the time the contract for the project was awarded.

    The government approved the project on Oct 7, 2009 and awarded BPC the contract to build it under the build own operates and transfer (BOOT) model with a 35-year concession period. The government signed the project development agreement with BPC on Jan 31, 2010.

    BPC has formed Kabeli Energy Limited, a special purpose vehicle, to build the project. The company has paid Rs 12 million in taxes to the government for project development.

    Source : The Kathmandu Post