MoE planning to start PDA talks with hydro developers

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    KATHMANDU, JUL 01 –

    MoEnThe Ministry of Energy (MoE) is planning to start PDA negotiations with hydropower developers building projects below 500 MW while the Investment Board Nepal (IBN) has been conducting power development agreement (PDA) negotiations with three foreign power developers.

    Though the ministry had made a draft PDA for hydropower projects below 500 MW and tried to start PDA negotiations with the hydropower developers, the process was stalled after most of the developers expressed reservations over the draft PDA. The developers had said that it was “technically and financially not sound”.

    Earlier, two separate PDA templates—one made by the MoE for hydropower projects below 500 MW and the other made by the IBN for projects above 500 MW—had been prepared to hold PDA negotiations with developers.

    However, chief secretary Lila Mani Poudel instructed the ministry to use the PDA template formulated by the IBN for projects below 500 MW too. Now, the MoE is preparing to send the same PDA template of the IBN to the hydropower developers.

    “We will send the template to the developers within a week to get their feedback and prepare the ground work for the PDA negotiations,” said Keshav Dhoj Adhikary, head of the PDA negotiation committee at the MoE.

    According to Adhikari, the ministry will first send the PDA template to Nepal Water and Energy Development Company, the developer of the 216 MW Upper Trishuli A project as it had fulfilled most of the criteria for beginning the PDA negotiations. The ministry has formed a PDA negotiation committee comprising representatives from the Finance Ministry, Ministry of Law and the Nepal Electricity Authority (NEA).

    A total of six hydropower projects with a collective capacity of 1,130 MW have applied to the Department of Electricity Development (DoED) for the PDA as of the third week of March. The projects include Upper Trishuli A, Upper Marsyangdi A (50 MW), Middle Bhote Koshi I (40 MW), Budhi Gandaki II (260 MW), Kali Gandaki Gorge (164 MW), and Lower Arun (400 MW). Some of them have been waiting to conclude PDAs for the last three years.

    Of the six PDA applicants, only Upper Trishuli A has paid the PDA fee while submitting the required documents. As per the PDA Procedure 2013, power developers have to pay US$ 1,500 per MW as processing fee to sign the PDA. If the government refuses to sign the agreement even after the payment of the fee, the amount will be refunded.

    Among other application requirements as per the new procedure are a feasibility report along with the estimated cost, financial analysis and drawing design, environmental impact assessment report, photocopy of the power purchase agreement (PPA) signed with the NEA and the letter of intent submitted by the funding institution to the developer.

    The PDA is an important contract between the government and investors. In the agreement, the government assures the investors that it would avert any possible social, economic or policy-level uncertainties during the construction phase. Generally, issues related to taxes, licence period, free energy, royalty, repatriation rights and parties’ obligations are included in the PDA.

    Source : The Kathmandu Post