Export-oriented projects reluctant to sell electricity

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    KATHMANDU, Feb 16

    NEA_BuldingThe foreign promoters of big projects have not showed much interest despite the Nepal Electricity Authority (NEA) inviting proposals for procurement of electricity during the dry season targeting them. NEA had sought proposals from export-oriented hydroprojects to address the energy demand during the dry season six years from now.

    Only five projects with combined installed capacity of 1724 MW have submitted proposals before the deadline expired last week. Over two dozen foreign promoters have taken license for construction of hydropower projects in Nepal. Proposals have been submitted by 440 MW Tila I and 420 MW of Tila II, developed jointly by KSK Energy of India and SC Power, Nepal, 282 MW Manang Marsyangdi, 182 MW Upper Marsyangdi and 400 MW Lower Arun. They have demanded that the Power Purchase Agreement (PPA) should be signed to buy electricity in US dollar until completion of the payback period. The license of Brass Power, Brazil for Lower Arun is expiring on May 15 and the license will be automatically cancelled if it fails to make financial arrangements within the period.

    NEA has determined a base rate for the first time to procure electricity from export-oriented projects at up to Rs 10.60 per unit during five months of the dry season (December to April). A committee has been formed under the deputy head of the Planning Directorate of NEA to study the proposals. The committee will also hold dialogue with promoters of the projects that have submitted proposals.  GMR Energy Limited, India that is constructing 900 MW Upper Karnali and 600 MW Upper Marsyangdi, Sutlej Hydro Power Corporation, India that is developing 900 MW Arun III and Statkraft International Hydro, Norway  that is developing 650 MW Tamakoshi III did not submit proposals.

    NEA Spokesperson Sher Singh Bhat conceded that fewer than expected proposals have been received. “We have yet to find out the reasons for that. Fewer proposals may have been made due to lower PPA rate or the probability of getting a better rate in India during the dry season,” he stated.

    Chairman of SC Power Harish Chandra Shah said his company has submitted proposal to end the prevailing energy crisis during the dry season. He revealed that proposals have been made to even sell at a lower rate to move the projects ahead as NEA cannot pay a higher rate. “We have expressed interest to sell electricity during the dry season in Nepal due to the problems faced in making financial arrangements for the projects before PPA is signed,” he reasoned. He demanded that Nepal should also take initiative to open to the Indian market.

    The NEA board has already approved the policy of procuring electricity from export-oriented projects. NEA stated that PPA rate has been fixed to send a positive message to the investors. It currently earns Rs 8.05 per unit on an average from selling electricity. The ministry had formed a task force under Joint Secretary Keshav Dhwaj Adhikari to prepare base rate of return and recommend it in mid-March, 2013. The task force has determined a rate of return of 18 percent for investors to expedite construction of reservoir based projects. While the rate of return was only determined for the run of the river projects earlier, the government has also guaranteed return for promoters of reservoir based projects as they also need to be constructed in recent times. The government has been providing a rate of return of up to 16 percent for run of the river projects.

    Source : Baburam Khadka / Karobar Daily