Managing Director’s Report on 37th anniversary of Nepal Electricity Authority

277

Managing Director’s Report

It is our immense pleasure to celebrate the 37th anniversary of Nepal Electricity Authority (NEA), with a greater determination in fulfilling our commitments for reliable, affordable and quality power supply to our esteemed consumers and ensuring electricity access to all.

This Annual Report is a reflection of the achievements made in the previous year and the targets to be met in the coming years. The past year has been noteworthy in the context of increased generation, expansion of transmission and distribution system, enhancement of domestic consumption, export of surplus electricity and profit earning.

It is relevant to recall here that the Russia-Ukraine war has led to an unprecedented global energy crisis. This has eventually made fossil fuel-based energy sources like coal and petroleum products scarce, leading to the soaring energy prices throughout the world. Nevertheless, it is our pride to state that we could maintain continuous power supply to our consumers without increasing the tariff even during this crisis.

With the addition of a generation capacity of 735 MW, including NEA’s solar power into the system in the last Fiscal Year (FY), Nepal has entered into the era of energy surplus during the wet season. This is likely to increase in subsequent years with more projects being integrated into the system. It is to be noted that the total generation capacity of our system a few years ago was less than the added capacity in the last FY alone. We are likely to see more projects to be completed and connected to the system at a much faster pace.  This will include the projects from the private sector and NEA’s subsidiary Companies.

Now with surplus electricity during the wet season months, we are in a position to export power to the neighboring countries. It is encouraging to mention here that Government of India (GoI) has granted concurrence to Nepal for the export of about 364 MW of power from various hydropower projects and, accordingly, NEA has been exporting the same through Dhalkebar-Muzaffarpur 400 kV transmission line to the Day-Ahead market of Indian Energy Exchange (IEX). We are confident that GoI will provide approval for more hydropower projects for export to India in near future.

This gradual increase in power export not only enhances NEA’s financial health but also plays a significant role in helping the nation increase foreign currency reserves.

It is our pride to state that NEA has achieved a record high net profit of NRs 16,165 million in the FY under review over its 37 years of operation. The main factors attributable to this profit are increase in sales, reduction in system loss, increase in NEA’s own generation including the commissioning of Upper Tamakoshi HEP (456 MW), reduction in import and increase in export, effective cost control and increase in financial and other incomes.

NEA has received AA++ rating from International Credit Rating Association (ICRA), Nepal, proving itself as a highly secured organization with a sound financial capacity. This has opened avenues for issuing IPO at  a premium value which will further enhance NEA’s investment capability for the development of major infrastructure projects in future.

In keeping with the worldwide trend of using Information and Communication Technology (ICT) for systematic and efficient management of a successful organization, NEA has been implementing various ICT tools such as Enterprise Resource Planning (ERP), Revenue Management System (RMS), Geographical Information System (GIS) Mapping, Smart Metering and Substation Automation for transforming NEA into a complete digital entity. Likewise, Security Information and Event Management System (SIEM) will be implemented to help the organization recognize potential security threats, unauthorized access or identities and vulnerabilities before they have a chance to disrupt business operations.

Unfortunately, some cases of injuries and deaths of the NEA’s employees and the general public due to electrical accidents were recorded in the last FY too. I, on behalf of the entire organization, would like to pay homage to the departed souls and assure greater vigilance and awareness to minimize accidents in the days ahead.

The performances and achievements of NEA in the year under review, 2021/22, are highlighted below:

  1. Operational Performance

The number of consumers of NEA has been increasing gradually over the years and, in the FY 2021/22, it has reached 4.77 million, an increase by 5.25 % against 4.53 million in the previous year. The figure does not include the consumers under Community Rural Electrification, which is serving about 0.55 million consumers in rural areas. Hence, the total consumers served has reached 5.32 million. As it has been in the past, the domestic consumer category remained the largest sector with 92.71% share of the total consumers. Industrial and other consumers accounted for 1.36 % and 5.93 % respectively. The total population with access to grid connected electricity has reached 92.51% in FY 2021/22.

NEA’s hydropower plants including small power stations generated the highest recorded annual energy of 3,259 GWh in FY 2021/22, an increase by 16.23 % over the generation of 2,804 GWh in FY 2020/21. This can be attributed to proper maintenance with the adoption of effective methodologies. Annual generation from hydropower stations reached 103.22 % of the target generation.

The power purchased from Independent Power Producers (IPPs) and NEA’s subsidiaries was 4,286 GWh and 1,976 GWh, an increase by 38.57 % and 1,235.14 % from the figure of 3,093 GWh and 148 GWh in FY 2020/21 respectively. The total energy imported from India was 1,543 GWh in FY 2021/22 as compared to 2,806 GWh in FY 2020/21, a decrease by 45.05 %. The total available energy in the system increased by 25% to 11,064 GWh in FY 2021/22 over the corresponding figure of 8,851 GWh in FY 2020/21. Out of the total available energy, NEA and its subsidiaries contributed 47.32%, whereas import from India and purchase from domestic IPPs accounted for 13.94% and 38.74% respectively. The contribution of the total internal generation to the total available energy has increased from 68% in FY 2020/21 to 86% in FY 2021/22.

The total domestic energy consumption in FY 2021/22 was 8,823 GWh, an increase by 21.28 % over the corresponding figure of 7,275 GWh in FY 2020/21. The total export to India soared to 493 GWh in FY 2021/22 against the previous year’s figure of 44 GWh only. Likewise, the net import of electricity after deduction of export was 1,050 GWh, which accounts only 9.49 % of the total available electricity in FY 2021/22.

NEA has also been successful in reducing the system loss from 17.18 % in FY 2020/21 to 15.38 % in FY 2021/22.

  1. Financial Performance

As compared to the previous year, NEA’s operating performance has improved significantly. Net profit has increased by 157.73 % to NRs. 16,165 million in 2021/22 from NRs. 6,272 million in FY 2020/21.

In FY 2021/22, NEA received an institutional rating of AA++ from ICRA Nepal Ltd, substantiating that NEA has a high capability to meet its financial obligations on time.

The gross revenue generated from energy sales and other income in the FY 2021/22 reached NRs 96,622 million, with an increase of 22.71 % over the figure of NRs 78,740 million in the FY 2020/21. NEA’s operating expenses including power purchase cost stood at NRs 75,550 million, an increase by 15.48 % from NRs 65,425 million of the previous year. The amount spent for power purchase alone was NRs 47,850 million in FY 2021/22, an increase by 17.15 % from NRs 40,846 million in FY 2020/21. Though the total power purchase cost has increased, the power import cost has decreased by 29.12 % from NRs 21,821 million in FY 2020/21 to NRs 15,466 million in FY 2021/22.

Other operating expenses for generation, royalty, transmission and distribution in FY 2021/22 amounted to NRs 1,946 million, NRs 1,576 million, NRs 2,174 million and NRs 10,709 million respectively.

The interest expenses in FY 2021/22 have been calculated as NRs 5,250 million as against NRs 5,482 million in FY 2020/21, a decrease by 4.23 %. Similarly, depreciation expenses amounted to NRs 6,998 million in FY 2021/22, an increase of 10.62% from NRs 6,326 million in FY 2020/21. Due to the depreciation of Nepali Currency against US Dollars, foreign exchange loss increased to NRs 994 million from NRs 225 million in the previous year.  The accumulated investment in Capital Works in Progress (CWIP) reached to NRs. 159,728 million with the net addition of NRs. 19,244 million for the year 2021/22.

NEA estimated a provision of NRs 2,750 million against the actual of NRs 2,730 million last year towards the long-term employee liabilities in respect of gratuity, pension, medical facilities and accumulated leave facilities under employees’ benefit scheme.

  1. Ongoing Projects

There are several hydropower projects at various stages of development under the Engineering Services Directorate. They are Chainpur Seti HEP, Aandhi Khola Storage HEP and Begnas Rupa Pump Storage HEP. Following the issuance of Joint Vision Statement during the visit of the Rt. Honorable Prime Minister to India, NEA has signed MOU with Sutlez Jalvidyut Nigam (SJVN), India for the joint development of Arun 4 HEP with an indicative capacity of 490.2 MW.

NEA was successful in commissioning the highest number and capacity of transmission lines and grid substations in FY 2021/22. The major transmission line projects commissioned were Koshi corridor 220 kV (106 ckt km.), Solu Corridor 132 kV (180 ckt km.), Marshyangdi – Kathmandu 220 kV (164 ckt. Km.), Motipur – Sandhikharka 132 kV (74 ckt km), Bardaghat – Sardi 132 kV (28 ckt km), Butwal – Mainahiya 132 kV (36 ckt. Km) and New Modi – Lahachowk 132 kV (40 ckt. Km.). Likewise, the new grid substation projects commissioned were New Butwal 220/132 kV ( 100 MVA ), Motipur 132/33/11 kV (46 MVA), Sandhikharka 132/33/11 kV (46 MVA), Mainahiya 132/33 kV (45 MVA), Lahachowk 132/33/11 kV (38 MVA), New Modi 132 kV switching station, Nawalpur 132/33/11 kV (79 MVA), Bharatpur (Anptari) 132/11 kV (30 MVA), New Khimti 220/132 (100 MVA), Kirtipur 132/11 (10 MVA), Ghorahi 132/33 (63 MVA), Singati 132/33 (30 MVA), Garjyang 132/33 (30 MVA), Inaruwa 220/132/33 kV (446 MVA), Baneswor 220/33 kV  (60 MVA) and Tumlingtar 220/132/33 kV (260 MVA).

The total length of transmission lines of 66 kV and above in operation is 5,329 circuit kilometer (ckt.km) and those constructed in FY 2021/22 is 455 ckt.km. The last seven years has seen a drastic increase in the completed transmission lines under operation to a total of 2,705 ckt.km. Similarly, a total of 715 MVA substation capacity, including up-gradation of existing substations has been added to the system in FY 2021/22. This has increased the total substation capacity to 7,149 MVA, with 5,017 MVA being added in the last seven years only. The total lengths of under-construction transmission lines at 132 kV, 220 kV and 400 kV levels are 1,430 ckt. km, 930 ckt. km and 754 ckt. km respectively, with the total of 3,114 ckt. km. Similarly, the total capacity of substations under construction is 7,857 MVA. The total of 1,470 ckt.km, 251 ckt.km and 3,010 ckt. Km of 132 kV, 220 kV and 400 kV transmission lines respectively are planned and proposed.  Similarly, 10,463 MVA of additional substation capacity is also planned to be built within the next few years.

NEA managed to substantially electrify 10 additional districts in FY 2021/22. This is in addition to the 32 districts already electrified in the previous years. NEA commissioned 11 new distribution substations of 33/11 kV corresponding to the capacity of 136 MVA in FY 2021/22 to bring the total number to 172 corresponding to the total capacity of 2,064 MVA. Likewise, the total line lengths corresponding to 33 kV, 11 kV and 0.4/0.23 kV voltage levels completed as of FY 2021/22 were 6,620 ckt. km, 44,840 ckt. km and 1,36,595 ckt. km respectively, whereas the line lengths commissioned in FY 2021/22 alone were 572 ckt. km, 3,659 ckt. km and 8,577 ckt. km respectively. A total of 39,361 distribution transformers with the capacity of 3,845 MVA has been installed in the system up to the fiscal year under review, which includes 2198 numbers of distribution transformers of capacity 222 MVA installed in FY 2021/22.

In addition, 256 MVA capacity of 33/11 kV substation, 2475 km of 33/11 kV overhead line, 840 km of 11 kV underground distribution line, 12,120 km of 400 Volt overhead line and 1,117 km of 400-volt underground line is being constructed in different parts of the country under Project Management Directorate (PMD).

Following Government of Nepal’s electricity roadmap, NEA’s commitment to light up every household of Nepal by the FY 2023/24 through adequate network expansion plans all over the country still remained a top priority. Enhancement of system reliability through network strengthening will continue unabated. Similarly, for safety, reliability as well as from the aesthetic point of view, underground cable laying works to upgrade the distribution system is underway in different parts of Kathmandu, namely; under Ratnapark, Maharajgunj, Kuleshwor, Kirtipur, Jorpati and Baneshwor distribution centers. Similarly, survey works have been completed for underground cable laying in Thimi, Bhaktapur, Pulchowk and Lalitptur distribution centers and the construction work will start soon. Furthermore, contract has been signed in FY 2021/22 for underground cable laying works in Pokhara and Bharatpur and currently the survey work is going on.

NEA has also started adopting modern digital technology into its system to enhance its operational efficiency, reduce energy theft and enable itself to serve its consumers in a better way. The implementation of Smart Grid and Smart Metering system will increase efficiency and reduce losses. Smart Meter installation in areas under Ratnapark and Maharajgunj Distribution Centers has been completed and results from the project are very encouraging. Bid for the supply and installation of smart meters for the remaining consumers of the valley will be invited by FY 2022/23.

NEA has already initiated for implementation of Enterprise Resource Planning (ERP) in NEA offices and Revenue Management System (RMS) in distribution centers. Proper implementation of this system is only possible with a Distribution Command Control and Data Centre. This Distribution Command Control and Data Center is nearing completion at the Load Dispatch Center premises at Suichatar, Kathmandu.

Substation Automation System in all transmission grid substations throughout Nepal is being implemented. Automation of grid substations will ensure controlled and systematic operation of the grid system. This will ultimately lead to reliable power supply and remarkable savings in the operation of the grid substations. Substation Automation System (SAS) being installed in 13 grid substations within the valley will be completed by FY 2022/23. Similarly, bidding process is undergoing for the automation of an additional 40 grid substations in different parts of the country.

The demand side management with energy efficiency program implemented in the past to reduce peak and energy demands of the system as a whole will be continued in the coming years. Capacitor Bank installation project for different substations and distribution transformers, which has helped improve voltage profile and reduce technical loss will be implemented in all Grid and Distribution Substations as required. Consumer awareness campaign for using efficient electrical appliances will be conducted effectively all over Nepal.

With the view to keep in track the future need of infrastructures, PMD has been involved in detail engineering and environmental study of more than 2000 ckt. km of 400 kV transmission line and associated substations, 300 ckt. km of 132 kV transmission line and associated substations. Moreover, in order to ensure adequate transmission capacity to deliver required power in major cities of Nepal, including Kathmandu, for the next 30 years, consultant has been recruited and studies are underway.

  1. Subsidiary Companies

The successful implementation of Chilime Hydropower Project under a subsidiary company of NEA encouraged the development of more projects under the company mode to ensure early decision making, public participation and mobilizing domestic fund. The major projects operating under the Company mode are as follows;

  1. Chilime Hydropower Company Limited (CHCL): CHCL was the first subsidiary company of NEA and owns the Chilime HEP (22.1 MW). It has formed three subsidiary companies, namely; Rashuwagadhi Hydropower Company Limited (RGHCL) to develop Rashuwagadhi HEP (111 MW), Madhya Bhotekoshi Jalvidyut Company Limited (MBJCL) to develop Middle Bhotekoshi HEP (102 MW) and Sanjen Jalvidyut Company Limited (SJCL) to develop Sanjen HEP (42.5 MW) and Upper Sanjen HEP (14.8 MW). All four projects are in different stages of construction. Rasuwagadhi after bearing the brunt of devastating floods, landslides and rockfalls in the recent past is scheduled to complete the project by March 2023. Middle Bhotekoshi HEP, also after many difficulties with flooding and landslides, is scheduled to commission the first unit by May 2023. Upper Sanjen, after all the delays, is likely to be completed by the end of 2022. Similarly, Sanjen HEP is scheduled for completion within this Fiscal Year. These projects are part of the GoN’s programme, “Nepal ko Pani Janata ko Lagani: Harek Nepali Bidyut ko Share Dhani”. Similarly, CHCL has established Chilime Engineering and Services Company Ltd (ChesCo) to provide Consultancy Services for the development of Hydropower Projects.
  2. Upper Tamakoshi Hydropower Limited (UTKHPL): Upper Tamakoshi HEP (456 MW), a national pride project, started commercial generation from August, 2021. UTKHPL is also planning to start construction of Rolwaling Khola HEP (22 MW) under EPC mode in this Fiscal Year, 2022/23.
  3. Tanahu Hydropower Limited (THL): Tanahu Hydropower Project (140 MW) is being developed under THL, a subsidiary company of NEA, under co-financing from ADB, JICA and EIB. The Package 2 Contractor has successfully completed the excavation of the underground powerhouse and the tailrace tunnel. The Package 3 Contractor is undertaking tower foundation works of 220 kV double circuit transmission line from Damauli to New Bharatpur Substation. After Contract signing, Package 1 Contractor has started the diversion tunnel and dam excavation. The project is scheduled for completion by May 2026.
  4. Trishuli Jal Vidhyut Company Limited (TJVCL): This Company was established with NEA and Nepal Telecom as promoters, to develop Upper Trishuli 3B HEP (37 MW) as a cascade of Upper Trishuli 3A HEP. GoN has included this project into its “Nepal ko Pani Janata ko Lagani: Harek Nepali Bidyut ko Share Dhani” programme. The construction, which was stalled in March 2020 due to the lockdown, resumed after more than a year in April 2021. The project is scheduled for completion by September 2023.
  5. Raghuganga Hydropower Limited (RGHPL): RGHPL was established as a subsidiary company of NEA to develop Rahughat Hydroelectric Project (40 MW). Civil and Hydro-mechanical works contractor Jaiprakash Associates Limited, India and Electro-mechanical works contractor Bharat Heavy Electrical Limited, India are being engaged in their works. The scheduled completion date of the project is August 2023.
  6. Upper Arun Hydroelectric Ltd (UAHEL): UAHEL was formed as a subsidiary company of NEA for the development of Upper Arun Hydroelectric Project (1,060 MW) and Ikhuwa Khola Hydroelectric Project (30 MW). EIA study for the Project is being carried out in parallel with the Detailed Engineering Design. EIA report was submitted to Department of Electricity Development (DoED) recently. GoN has declared the project as a “Game Changer Project” giving utmost priority for development. The supervision consultant and access road construction contractor selection process have been started. The main construction of the project is scheduled to start from November 2024.
  7. Tamakoshi Jalvidyut Company Limited (TKJVC): Tamakoshi Jalvidyut Company Limited has been incorporated for the development of Tamakoshi V HEP (99.8 MW), which is a cascade development of the Upper Tamakoshi HEP.

Employers Provident Fund (EPF) has committed for the complete debt funding (70:30 ratio) for the construction of Tamakoshi –V HEP. A tripartite Memorandum of Understanding (MoU) was signed between NEA, TKJVC Ltd and EPF.

  1. Dudhkoshi Jalvidyut Company Limited: This Company, as a subsidiary of NEA, has been established for the implementation of Dudhkoshi Storage HEP (635 MW). The Consultant is finalizing the reports and documents with the incorporation of the comments/ suggestions of the Panel of Experts and the ADB Experts. The Consultant’s work schedule shows the finalization of the Detailed Design Report will be completed by October 2022.

Discussions for concessional loan for the construction of the project is underway with ADB and EIB. Similarly requests have been sent to Citizen Investment Trust (CIT), Employees Provident Fund (EPF) and Hydroelectricity Investment and Development Company Limited (HIDCL) for commercial loan. Financial arrangement should be completed by September 2023 and actual construction is scheduled for early 2024. NEA has categorized this storage project as a priority project.

  1. Modi Jalvidyut Company Limited (MJCL): MJCL is a Subsidiary Company of NEA established to develop and implement two projects namely Upper Modi A Hydroelectric Project (UMAHEP) 42MW and Upper Modi Hydroelectric Project (UMHEP) 19.8 MW in Kaski District of Gandaki Province.

As the part of financial closure of UMAHEP, a Term Sheet has been signed with NMB Bank Limited as a lead bank and Hydroelectricity Investment and Development Company Limited (HIDCL) in April, 2022.

  1. Utterganga Power Company Limited UGPCL): This company was established as a subsidiary of NEA to undertake the study and development of Uttarganga Storage Hydroelectric Project (828 MW) in Baglung district of Gandaki Province.

In FY 2021/22, Mahab Ghodds Consulting Engineering Company, Iran was selected to prepare the Detailed Engineering Design Report and Bidding Documents.

  1. NEA Engineering Company Limited (NEC): NEA established NEC as a subsidiary company in 2017 to provide complete engineering services and solutions in the development of the energy sector as well as other infrastructures. NEA holds majority ownership of 51% and remaining 49% is held by Vidyut Utpadan Company Limited (VUCL), Rashtriya Prasaran Grid Company Limited (RPGCL) and HIDCL. NEC is providing the consulting services for Feasibility Studies, Detailed Engineering Design, review of the design and documents, Project Management, Construction Planning and Supervision of Hydroelectric and other Infrastructure Projects in different fields such as civil, hydro-mechanical, electro-mechanical, transmission line and distribution system, plant operation, maintenance and rehabilitation works etc.

The company intends to build national engineering capability for medium to large hydro-projects, extra high voltage engineering and similar techno-intensive areas. Since the establishment, NEC is gradually progressing towards its Core Vision and Mission in the field of Engineering Consulting Services.

  1. Nepal Power Trading Company Limited (NPTC): NPTC has been established with the objective of carrying out power trading within and outside the country. Business Plan for its operation was approved by the Company’s Board and GoN has recently issued license for business operation.
  2. Power Transmission Company Nepal Limited (PTCN): This is a subsidiary company of NEA, established with the objective of developing high voltage transmission interconnection system between Nepal and India for mutual benefit. The Nepal portion of the 400 kV double circuit line between Dhalkebar and Muzaffarpur was implemented by PTCN.
  3. Private Sector Participation

NEA has been facilitating the participation of the private sector through Power Purchase Agreements (PPA) to ensure meeting the energy demand. NEA has fixed posted rates for energy purchase from three categories of hydro projects; viz Run of River (ROR), Peaking Run of River (PROR) and Storage type projects.

A total of 24 new projects developed by the Independent Power Producers (IPPs) with a combined installed capacity of 717 MW were commissioned in FY 2021/22. This has increased the total number of IPPs-owned projects in operation to 132 with a combined installed capacity of 1,532 MW, with NEA subsidiary company projects contributing 478 MW.

A total of 141 projects to be developed by IPPs, with a combined installed capacity of 3,281 MW are under construction after financial closure. Similarly, 84 IPPs-owned projects with a combined installed capacity of 1,553 MW are at various stages of development.

During FY 2021/22, a total of 12 new PPAs with a combined installed capacity of 183 MW were signed. This included 7 hydropower and 5 solar power projects with combined installed capacity of 145 and 38 MW respectively. This has increased the total number of PPAs signed with the various IPPs to 357 with the combined installed capacity of 6,366 MW as of FY 2021/22.

So far as power purchase from domestic solar power developers is concerned, NEA Board decided to purchase it through competitive bidding only with the bench mark price of NRs 5.94 per kWh, considering significant price fall of solar power in the neighboring countries and all over the world. NEA has completed the preparations of bid documents for the same so that it can invite the Bids as soon as the consent from the Electricity Regulatory Commission is granted.

Likewise, NEA has been prioritizing the Power Purchase Agreements (PPA) for the Peaking Run-Off-River projects and accordingly signing PPAs in Take-or-Pay basis is in progress. As GoN decided a new Generation Mix by increasing the content of ROR hydro-projects from a maximum 35 % to 45 %, thereby decreasing the content of storage and pumped storage projects by 10 %, NEA is looking forward to signing more PPAs for RoR projects in line with some changes in the policy measures.

  1. Cross Border Power Trading

Over the past year, a record commissioning of 717 MW of new hydropower projects from NEA’s subsidiary companies and the private sector has mustered enough confidence to NEA for exporting significant quantum of power to India during the wet season. It was for the first time that the Government of India (GoI) granted an approval of around 364 MW of power export from 6 hydropower projects in Nepal to “Day-Ahead Market” of IEX soon after the visit of the Nepalese Prime Minister to India, during which a Joint Vision Statement on Power Sector Cooperation was issued on 2 April, 2022. With this approval, NEA started selling power in the IEX’s Day-Ahead Market everyday through the submission of sell-bids for the next day’s every 15-minute time slot through the power export to IEX. This took place for the first time on 3 November, 2021 through Dhalkebar-Muzaffarpur 400 kV transmission line. Likewise, the last fiscal year was important in view of power import on the Day-Ahead basis from IEX through 132 kV Tanakpur-Mahendranagar transmission line since 15 January, 2022 instead of relying on bilateral mode of transaction alone before it. NEA has already submitted applications for other various hydropower projects for power export to India and they are in the process of approval of GoI. In the last fiscal year, NEA also invited tenders from the Indian entities for selling 200 MW of power from 1st July to 15th November, 2022 though it ended in a fiasco, as the Bid process had to be called off as the price was not attractive relative to the prices in the Power Exchanges in India. However, NEA has gained experience of competitive bidding in power export involving Indian participants for the first time.

The last fiscal year witnessed some key developments in the cross border grid connectivity, too, as GoN granted approval for equity investment on the Indian portion of New Butwal – Gorakhpur 400 kV transmission line through JV Company between NEA and POWERGRID of India on 3 August, 2021 and the Joint Venture & Shareholders’ Agreement was eventually signed by the said entities on 8 September, 2021.By virtue of dominance of RoR projects, Nepal still needs to rely on India for the power during the dry months despite surplus situation in the wet season. In the last fiscal year, NEA imported 1,543 GWh of electricity from India through bilateral mode and IEX, whereas total power export to India increased to 493 GWh, which valued as NRs 15,466 million and NRs 3,884 million respectively.

The experience of last year’s cross border power trade has shown that NEA is taking great strides to earn foreign currency through power export to India and this will further grow in future as more hydropower projects get commissioned.

Likewise, under the Nepal-China cooperation in power sector for the construction of the Ratmate-Rasuwagadhi-Kerung 400 kV transmission line, the feasibility study has been completed.

  1. Way Forward

NEA as a power sector utility has always been moving forward to meet its main objective of satisfying its consumers with reliable, quality and affordable supply of electricity as well as maintaining sound  financial health for further development. Succeeding in meeting this objective has culminated in people’s trust and optimism in our endeavors towards achieving the long-standing goal of becoming self-reliant in our energy uses and reducing trade deficit by exporting surplus electricity to neighboring countries.

NEA will continue its efforts in developing hydropower projects on its own and with joint venture partners, through subsidiary companies and IPPs as per the concept of generation mix. Our focus will be more on large-size reservoir and peaking hydropower projects. NEA is initiating construction of Dudhkoshi reservoir (635 MW), Upper Arun (1061 MW), Chainpur Seti (210 MW), Tamakoshi V (99 MW) and Upper and Lower Modi (60 MW) projects with utmost priority. Likewise, Arun 4 Hydropower Project (490.2 MW) is being developed by joint venture company between NEA and Satlej Jalvidyut Company, India. It is hoped that this will make the system operation more flexible and reliable, meeting the varying demands of a single day as well as of the entire season.

NEA will be implementing new PPA policies like procuring solar power through competitive bidding and allowing the optimum probability of exceedence for designing hydropower projects in order to generate maximum energy during the wet season months.

More transmission interconnections are being planned between Nepal and India for commissioning in different timeframes. NEA is also developing a 400 kV transmission line backbone inside Nepal with the support from various donor agencies like the World Bank, Asian Development Bank, KfW, Norad, JICA and EIB.

Considering the prospects of high demand growth in Kathmandu and other major urban areas of the country, NEA has formulated plans for building transmission and distribution infrastructures to meet the demands of the next thirty years. Various studies in this regard are being conducted, whereas the land acquisition for 20 different substations within Kathmandu valley is in progress.  Similarly, the studies on the transmission system for 17 major cities outside Kathmandu valley shall be concluded to start the construction activities soon. This will not only meet the power demands until 2050 but also enhance the reliability and quality of power supply. Furthermore, studies on dedicated 400 kV and 220 kV multi-circuit south corridor transmission lines, approximately 600 km, along the postal highway are underway. This will connect various industrial corridors to meet the load demands of the upcoming industries near the Indo-Nepal border. The transmission lines and substations built near the border will ultimately support cross border power trading between Nepal and the neighboring states of India. NEA will manage the fund requirement for the implementation of these projects with its own resources and concessional loans from various multilateral financing agencies including Exim Banks.

With the commissioning of Upper Tamakoshi HEP into the system, we have been experiencing surplus electricity situation during the wet season. With more projects scheduled for commissioning in the near future, we will reach the situation of electricity surplus throughout the year.

The primary aim will be to increase domestic consumption and then go for export. We have already initiated steps to increase domestic consumption in various ways including electric cooking and the use of Electric Vehicles (EVs). This will not only help consume additional energy but also save the country from millions of dollars being spent on oil and gas.

With the rise in the production, reliability and longer range of EVs, as well as with the government’s initiative in lowering taxes on them, use of EVs should be given top priority from all sectors, wherever practically possible.  The increasing number of these vehicles on the road is a clear indication of the public’s inclination towards them due to the ever-increasing cost of fuel. It should be the initiative of the government to ensure that, at least, all government offices gradually switch to EVs. Similarly, public transportation can also be gradually converted to EVs. NEA has already started the installation of EV charging stations based on DC Fast Charging Technology at 51 prime locations all over Nepal, whereas it is encouraging to note that numerous private companies have started to establish charging stations at different locations.

Domestic use alone will not be sufficient to consume the ever-increasing electricity generation in the country in the upcoming years. Industrialization is another source for consumption of a large chunk of energy.  Initiatives should be taken to encourage industrialization from the private sector as well as from the government on a larger scale. For this purpose, NEA has already carried out Grid Impact Study (GIS) of nearly 500 MVA for bulk load industries and, with the continuous improvement of transmission and distribution system, the industrial load is expected to rise significantly in the days ahead.

Nepal has been transitioning from a nation of chronic electricity deficit to the changed landscape of electricity surplus. NEA will continue to play a crucial role to enhance cross border power trading with India and expand it to Bangladesh in near future. As envisaged by India-Nepal Joint Vision Statement on Power Sector Cooperation issued in April 2022, NEA is committed to prepare itself for the adequate market access of neighboring countries by developing more high voltage transmission interconnections with India and using the existing transmission network in India for power trade with Bangladesh in line with the provision of India’s Guidelines for Import /Export (Cross Border) of Electricity-2018. The Third Meeting of Joint Working Group and Joint Steering Committee on Nepal-Bangladesh Cooperation in the Field of Power Sector held in September 2021 has designated NEA on behalf of GoN for exploring and initiating power trading between the two countries. NEA is making all efforts to trigger this trade business with Bangladesh through the designated counterpart, Bangladesh Power Development Board (BPDB), by utilizing the spare capacity of the existing India-Bangladesh cross border transmission lines. NEA has also been consulting with the Indian power traders, which are already engaged in power trade with Bangladesh.

Further, NEA will be signing Implementation and Transmission Service Agreement (ITSA) in near future with the JV Company of NEA and Power Grid Corporation of India for the development and construction of the Indian portion of New Butwal-Gorakhpur 400 KV (Quad Moose) Transmission Line and the partnership with the POWERGRID shall be continued for the development of other cross border interconnections also  to the extent possible so that there is adequate power transfer capacity in the cross border transmission lines to export Nepal’s surplus power to the markets of neighboring countries in various timeframes.

Likewise, NEA will carry out necessary consultations and deliberations with the concerned agencies in India to allow power trading through other entities besides North Bihar Power Distribution Company Limited (NBPDCL), by paying the wheeling charges for the existing transmission system within Bihar, to avoid non-utilization of various 132 kV Nepal-Bihar transmission links during the wet season when Nepal will have enough surplus electricity for export.

As Nepal Power Trading Company, NEA’s subsidiary, has already obtained trading license from GoN in the year foregone, NEA will emphasize its operation for both domestic and cross border power trade through it from this fiscal year 2022/23 onwards.

The 400 kV transmission line from Ratamate (Nepal) to Kerung (China) will lead to Nepal-China power trading in the years to come. The feasibility study of Nepal side of transmission line has been completed and, at the same time, the Cooperation Agreement between the two countries has been extended by two years on 26 March, 2022 during the visit of the Chinese Foreign Minister to Nepal. We look forward to trading power with the neighboring countries on long-term basis through PPAs. Our ultimate goal will be to expand cross border power trading to sub-regional and regional levels.

Green Hydrogen is becoming a major source of fuel for transportation in the world in near future. Hydrogen Vehicles (HVs) have been manufactured by many countries and started its commercial use.  Green Hydrogen is not only used for transportation but also to produce ammonia and chemical fertilizer (Urea). Nepal should focus on production of Green Hydrogen, Ammonia and Urea to ensure our energy and food security in future. With the abundance of water and hydropower, Nepal can play a major role in this new field of energy source.

As an initiative, NEA has signed an MOU with Global Green Growth Institute (GGGI) to explore the possibility for the production of Green Hydrogen, Ammonia and Fertilizer. Similarly, NEA has also signed an MOU with the School of Engineering, Kathmandu University, for feasibility study of Green Hydrogen, Ammonia and Urea production. Its main objective is to prepare a Detailed Project Report for pilot-scale Green Ammonia production and ensure better utilization of hydropower.

NEA has the vision and understanding for the need to continually expand its Information Technology (IT) infrastructure in the years ahead. To achieve this goal, IT Roadmap has been prepared for its systematic implementation in all its business functions.

In line with this vision, NEA IT Policy has been reformed, which aims to modernize its functioning through the use of ICT to ensure secure, stable and standard IT infrastructure. Our endeavor towards this direction will lead to “Digital NEA” which will be in line with the GoN’s vision of “Digital Nepal.”

NEA will establish an IT Communication Network Infrastructure to connect all offices along with the SCADA System of all the substations, and shall also co-ordinate to work in collaboration for the operation of the Data Center located at LDC, Syuchatar. This Communication Network Infrastructure backbone along with Data Center shall not only benefit NEA as a whole, but also can be used as a revenue generating source by leasing bandwidth and data space in the coming days.

Emphasis will be given to the fast deployment of automation and digitization in our businesses. The use of automation system to monitor, control and manage the power system from generation to distribution shall remain our priority for facilitating the reduction of operational cost and providing better services to our valued consumers. Likewise, digitization of paper-based processes shall be our initial step towards digitalization, which is an essential element of digital transformation of NEA for its future.

Organizational restructuring of NEA will continue to be our top priority to be addressed in the days to come and it will be accomplished with the adoption of an agreeable modality by allowing amendment to the NEA Act, 2041. The initial framework for restructuring has been formulated in Corporate Development Plan, 2019, as approved by the NEA Board.

Capacity building programs will be continued on a larger scale for efficient operation and implementation of NEA’s activities. In this regard, training for all levels of employees within the organization will be effectively conducted in the years to come.

It is our firm belief that ensuring the best service delivery and improving morale and financial health of our organization will definitely improve our credibility and will open avenues for all-round development of the organization in a better way. Our every endeavor shall be focused for better and efficient NEA.

  1. Acknowledgements

I, on behalf of NEA, would like to take this opportunity to acknowledge the contribution of everybody, directly or indirectly associated with the performance and achievements of NEA. I would like to express my sincere gratitude to the honorable Minister of Energy, Water Resources and Irrigation, Chairman of NEA Board of Directors, for her dynamic and proactive leadership in boosting the morale of team NEA and providing the right direction to the organization. I am also grateful to the Secretary, MoEWRI, for his continuous support and direction in meeting the targets assigned to NEA. My sincere gratitude also goes to the members of the NEA Board of Directors for their expert and valuable guidance in decision making and formulating policies for the overall organizational performance and achievements within the framework of authorities and responsibilities envisaged in the NEA Act, 1984.

I would also like to thank the Government of Nepal, Ministry of Energy, Water Resources and Irrigation, Ministry of Finance and other concerned Ministries of the GoN for their continued support, encouragement and patronage in the development of energy sector. I sincerely acknowledge the great concern shown by the parliamentary committees in our regular operation and development pursuits. I would also like to express my sincere gratitude to Electricity Regulatory Commission (ERC) for effective regulatory functions.

I am also grateful to the donor communities, including World Bank, ADB, JICA, EIB, AIIB, KfW, NORAD, Exim Bank of China, Exim Bank of India, Exim bank of Korea, who have always helped us in the past and are willing to continue their involvement in the coming days to achieve our goal of fulfilling the growing needs of energy. I also extend my sincere appreciation to Employees Provident Fund (EPF), Citizen Investment Trust (CIT), HIDCL and Rashtriya Beema Sangsthan for their help in fulfilling our investment needs. I sincerely appreciate the banks, auditors, IPPs, suppliers and investors for bestowing faith on us and helping us move forward. Likewise, my thanks also goes to the Indian power trading companies- NTPC Vidyut Vyapar Nigam (NVVN) and PTC India Limited- for continuously trading power with Nepal.

The role of the media in disseminating factual information about the organization to the general public has always been encouraging. I look forward for similar support in the days ahead. I would also thank and express my gratitude to all my predecessors, who have contributed to NEA’s growth.

The entire staff of NEA including the Employee Unions deserve appreciation for their hard work, support and cooperation for daily operation of activities and in implementing the policies even in difficult situations. Finally, I would like to express my sincere thanks and appreciation to our valued consumers and different professional organizations for bearing with us at times of extreme difficulties and boosting our morale by recognizing our untiring efforts. I would like to assure our valued consumers that every possible step will be taken to maintain a continuous, reliable and safe power supply in the coming days.

 

Thank You.