NEA preparing modality to let private sector erect power lines

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    KATHMANDU, FEB 07 –

    The Nepal Electricity Authority (NEA) has started preparing a modality to facilitate construction of transmission lines by the private sector. Presently, it is the only entity permitted to build power lines in the country.

    Two weeks ago, the NEA formed a committee to prepare the necessary documents as per the instruction of the Energy Ministry, said NEA spokesperson Sher Singh Bhat who is also head of the committee.

    The team will study various international models and prepare the most suitable and investor-friendly system to make private sector financiers feel comfortable, he said. The documents to be prepared by the NEA are expected to institutionalize private sector investment in the construction of the country’s power lines.

    Last January, the Energy Ministry had decided in principle to allow the private sector to build power lines and ordered the NEA to prepare an investment modality and draft of a transmission service agreement (TSA).

    The Energy Ministry decided on involving the private sector after finding the NEA unable to expedite construction of transmission lines.

    The ministry has proposed that an individual investor or firm be allowed to invest up to 33 percent of the total cost of a transmission line project.

    Private sector interest was inspired by seeing the NEA struggling with power line projects. A number of companies including Himalaya Energy Development Company (HEDC) have even submitted proposals to obtain the Energy Ministry’s go-ahead. HEDC has proposed building the 132 KV Khimti-Gajryang transmission line under the Build and Transfer (BT) modality.

    The idea of inviting the private sector to construct transmission lines is not new. The Interim Plan has envisioned involving the public and private sectors, community and cooperatives in power generation and transmission.

    The government has planned to construct 408 km of transmission lines in the current Interim Plan (2010-11 to 2012-13). However, not a single transmission line project has been completed even though the NEA started work on the Bharatpur-Hetauda, Khimti-Dhalkebar and Thankot-Chapagaun-Bhaktapur lines.

    Previously, the NEA had recommended to the government to allow the private sector to erect transmission lines under two models—Build-Own-Operate-Transfer (BOOT) and BT.

    The NEA had stated in its report submitted to the Energy Ministry in May 2012 that the private sector could be allowed to build transmission lines to evacuate power from under-25 MW hydropower projects with which the government has signed power purchase agreements (PPA).

    The report also said that interested developers would have to sign a TSA with the NEA, and could make the financial management on this basis. The report has also said that the government could transfer transmission line projects being built by the NEA to the private sector.

    “We will come up with an integrated modality proposal very soon after conducting more studies,” said Bhat. The expertise and capital possessed by private investors will help in the development of transmission lines, he added.

    “As the private sector is much more flexible in project development than the NEA and they can also encourage the local people, its involvement in building transmission lines will benefit the country’s power sector,” he said.

    A high-level NEA official said that the committee had been thinking about whether to allow the private sector to invest only in local transmission line projects or cross-border lines too.

    Meanwhile, Hydroelectric Investment and Development Company (HIDC) has decided to invest in the Dhalkebar-Muzaffarpur cross-border transmission line by acquiring a 14 percent stake in Power Transmission Company Nepal Limited which will build the Nepali portion of the project.