Khimti PPA row back to haunt project

The issue of Khimti Hydropower Project power purchase agreement (PPA) is back with the Nepal Electricity Authority (NEA) officially writing to the project on the amendment of the PPA rate.

The dollar PPA with Khimti and Bhotekoshi has been a controversial issue with critics saying that the NEA has been suffering huge losses due to these two projects. The PPAs were signed in dollars with the NEA bearing the exchange rate risk.

The NEA forwarded a letter on June 25 to the Himal Power Limited (HPL), citing losses due to the PPA signed in dollars. According to NEA officials, HPL, the promoter of the 60-MW Khimti I Hydropower Project, has shown indifference to the government’s request to amend the PPA rate.

According to NEA officials, HPL has responded to its letter and said that the company will take the matter into consideration.

Khadga Bahadur Bista, the Business Development Director of SN Power, said that as a decision on NEA’s proposal cannot be taken by the management alone, the proposal must be forwarded to the shareholders of the project. SN Power, a Norwegian company, has a majority stake (57.07 percent) in the HPL. Another Norwegian company BKK holds 26 percent of the stakes, while Butwal Power Company has around 17 percent in the HPL.

“The proposal has already been forwarded to the Norwegian companies, which hold a majority of the stakes,” Bista said. “A formal decision from these companies is likely to come in the second week of August.” Bista, however, said the PPA rate could be revised with mutual understanding between the two parties—HPL and NEA.

Energy Secretary Hariram Koirala had also proposed amendment of the PPA rate during the visit of Norwegian Minister for International Development Heikki Holmås in the first week of June.

The NEA signed the PPA rate with Khimti at 5.2 cents per unit initially, which was later revised to 5.9 cents. According to a source at the NEA, it has to invest Rs 9.70 for distribution and transmission of per unit energy bought from Khimti project, including service charge.

The Khimti project built under a Build, Own, Operate and Transfer (BOOT) model is the first power project in the country developed by the private sector.

The project started commercial operations in July 2000. The NEA had purchased a total of 365 million units of energy worth Rs 3.49 billion from the HPL in the last fiscal year.