Ministry urged to sign PDA, PPA simultaneously



    Oct 27, 2016- The Ministry of Law, Justice and Parliamentary Affairs has urged the Energy Ministry to conclude the Project Development Agreement (PDA) and the Power Purchase Agreement (PPA) of the Upper Trishuli-1 Hydroelectric Project simultaneously so that its implementation can be expedited.

    The recommendation follows the ‘initial signing’ of the PDA between the Energy Ministry and the project developer Nepal Water and Energy Development Company (NWEDC).

    The Law Ministry presented its suggestion after receiving a copy of the PDA from the Energy Ministry for its approval. A Law Ministry official said the idea was to expedite the construction of the 216 MW project located 70 km northwest of Kathmandu.

    “There are numerous instances of projects struggling to conclude the PPA even after signing the PDA which leads to delays in the construction of the project,” the official said. “So, if both the agreements are concluded at the same time, the project can be implemented immediately.”

    The Law Ministry’s suggestion is also based on best international practice where the two agreements are concluded at the same time.

    NWEDC has been trying to conclude the PDA with the Energy Ministry for over two years now. After signing the deal, it needs to enter into separate negotiations with the Nepal Electricity Authority (NEA) to seal the PPA.

    “Since both the bodies are government agencies, it would be logical to conclude the two accords at the same time,” said the official. “We want this practice to be followed while signing other energy deals too.”

    Koshal Chandra Subedi, joint secretary of the Energy Ministry, confirmed receiving the suggestion from the Law Ministry. He, however, said it was ‘only a suggestion’ and not legally binding.

    Another Energy Ministry official who wished to be unidentified said signing both the agreements at the same time was not possible, as the PDA and the PPA are two different sets of pacts.

    “As the PDA negotiations have already been completed, it won’t be logical to delay signing it until the PPA negotiations are completed,” the official said.

    He added that it wouldn’t take a long time to conclude the PPA negotiations as the

    PDA has clearly stated the terms and conditions related to the currency in which the PPA should be signed and other issues concerning payments.

    The PDA says the project will be allowed to enter into a dollar-denominated PPA for a period of 10 years so that the project developer can repay foreign debts in convertible currency. The PDA also says the government will guarantee payment to the developer if the NEA defaults on payments during the concessional period of 30 years.

    NWEDC is a joint-venture company owned by three Korean companies (Korea South East Power Company, Daelim Industrial Corporation and Kyeryong Construction Industrial Corporation), International Finance Corporation (IFC) and Nepali investor Bikesh Pradhanang.

    The run-of-the-river project will generate 216 MW of energy through three turbines of 72 MW capacity each.

    The plant is expected to produce 1,456.4 gigawatt hours of net electricity per year, of which 1,149.7 gigawatt hours would be generated in the wet season and 306.7 gigawatt hours in the dry season.

    The project site is located near Dhunche, the headquarters of Rasuwa district.

    Source: The Kathmandu Post