Cost of Andhikhola raised by over three times

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    ” Rs 1.20 b for expansion by 4.4 MW “

    KATHMANDU, Jan 13

    Andhi Khola upgradingButwal Power Company (BPC) has raised the cost of 5 MW Andhikhola Hydropower by over three times while expanding its capacity.

    BPC has raised the per MW cost of the project to Rs 280 million though the previous cost of Rs 180 million per MW should have been halved after expansion. It is making additional investment of Rs 1.20 billion to expand the project capacity by 4.4 MW. Almost Rs 750 million, enough to construct a new 8 MW project, of the cost has been unnecessarily raised. The government, general public, private sector and foreigners have invested in BPC. The installed capacity of the project will rise to 9.5 MW after completion.

    Energy entrepreneurs claim that the cost of this project, being constructed with private investment, can be much lower. They argue that the actual per MW cost for expansion of a project is only around Rs 80-100 million. The cost of even a new project with Detailed Project Report (DPR), Environmental Impact Assessment (EIA) is only around Rs 160-180 million per MW, according to them. A BPC official stated that the cost has been amended thrice. The official revealed that the project was first designed at the cost of Rs 900 million and then it was raised to Rs 1.10 billion by changing the design and finally to Rs 1.20 billion. The official claimed that the cost will rise further as just 80 percent of the work has been completed. “The cost of Rs 900 million proposed at first itself was high. The cost of expansion by 4.4 MW should not have crossed Rs 500 million,” the official stated and accused that the investors have made profit even before construction of the project by raising the cost.

    The official argued that the time to repay bank loans will also rise due to sudden rise in the project cost. “It will take over six years to repay the principal and interest and the return for commoners will reduce as a result,” the official continued. The official explained that the project can be expanded at half of the cost as it is expanded on the already constructed infrastructure with some amendments. “The cost of Ranimai Project was raised by just Rs 480 million while expanding it by 6 MW,” the official cited an example.

    Mega Bank has invested Rs 350 million and the International Finance Corporation (IFC) under the World Bank Rs 500 million in Andhikhola. Operation of the project has been stopped since November, 2012 for expansion and it will remain closed until April. Income will be affected even this year due to the sudden rise in cost while the return for investors will also be affected. The income of BPC was halved to Rs 16 million in the first three months of the current fiscal year.

    Project chief Bishnu Bahadur Singh, however, refused to acknowledge that the cost has increased. “The cost seems to be a little high as the time of construction has increased and the design also had to be changed. We cannot call that rise in cost,” he argued. He explained that there has been some impact on the cost due to geological problems in the project, delay in work by the civil contractor Himal Hydro and General Construction Company Limited due to change in its investment structure, and payment of tens of millions in insurance. He claimed that Rs 50 million had to be spent in insurance alone as IFC has also invested in the project.

    The Power Purchase Agreement (PPA) of Andhikhola and Jhimruk has expired after last August. Preparations are on to take a proposal to the Nepal Electricity Authority (NEA) board to raise the PPA rate for BPC on the basis of inflation. NEA and BPC had signed PPA on July 13, 2001. The average PPA rate for Jhimruk is Rs 6.20 per unit and that for Andhikhola Rs 4.48. BPC is operating Jhimruk (12.5 MW) and Andhikhola projects. It is also earning around Rs 400 million in dividend from Khimti.

    The government had sold BPC to Shangrila Energy for Rs 800 million. Shangrila has 68.95 percent shares in BPC, commoners 10, government 9.9, Intercast Nepal 6, United Mission to Nepal 2.79, staffers 2 and NEA 1.

    Source : Baburam Khadka / Karobar Daily