Energy Ministry told to review PPA with Upper Botekoshi, Khimti

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    KATHMANDU, JAN 09 –

    Ministry of EnergyThe government has directed the Ministry of Energy (MoE) to review the Power Purchase Agreement (PPA) signed with Khimti and Upper Bhotekoshi Hydroelectricity Projects.

    A meeting of the central monitoring and evaluation committee under the Prime Ministers’ Office (PMO) on Monday took a decision to this effect. The chief secretary-led committee has given three months to the MoE to review the PAA.

    The PPA signed in dollar terms with Khimti (60 MW) and Bhotekoshi (45MW) has been a controversial issue, with critics saying the Nepal Electricity Authority (NEA) has been suffering huge losses due to these projects.

    At the meeting, Chief Secretary Lila Mani Poudyal, citing NEA’s losses, said PPA in dollar terms should be discouraged now onwards, according to PMO sources.

    Interestingly, Energy Secretary Bishwo Prakash Pandit had rejected the idea of reviewing the PPA rate, terming it “impossible”. “We had asked the parties

    concerned to review the PPA rate in the past, but they were not keen to do so. Hence, it is not possible to breach the agreement unilaterally,” Pandit said at the meeting.

    Independent power producers say if the government moves ahead with the decision, it will have a “serious impact” on the hydropower sector. “If the government wants to bring in foreign investment in the hydropower sector, we should honour the agreement done with independent power producers (IPPs),” said Khadga Bahadur Bista, president of Independent Power Producers Association Nepal (IPPAN). “If there are problems in PPA agreement, it can be resolved through talks.”

    This is not the first time that the government has said the PPA with Khimti and Bhotekoshi should be reviewed. In March 2013, the NEA board had directed the NEA management to initiate a dialogue with the promoters of these projects to sign PPA in Nepali rupee terms.

    In 2012, NEA had officially written letter to Himal Power Limited, developer of Khimiti, for the amendment to the PPA. But talks failed to yield desired results.

    NEA had signed the PPA with Khimti at 5.2 cents per unit initially, which was later revised to 5.9 cents. As per the PPA with Bhotekoshi, the per-unit energy price was fixed at 6 cents.

    According to NEA, it has to spend around Rs 9 per unit for distribution and transmission of energy bought from Khimti and Bhotekoshi projects.

    The then Parliamentary Public Accounts Committee in 2010 had said the NEA was incurring annual losses of Rs 2.5 billion due to the agreements with the two projects, requiring costly payments in US dollars.

    With IPPs now seeking PPA in US dollar terms, the agreement will become a tough issue for the NEA in the coming months. NEA is the sole purchaser of electricity generated by IPPs.

    Therefore, the committee on Monday directed the MoE to prioritise national interest while signing the PPA now onwards. “After completing the payback period, the provision of mandatory revision of the PPA rate should be included,” the meeting decided.

    Source : The Kathmandu Post