NEA team okays PPA signing with Super 6

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    • The state-owned power utility had been reluctant to sign PPAs due to inadequate funds to build transmission lines

    KATHMANDU, SEP 19 –

    NEA_BuldingThe promoters of the Super Six projects will sleep easier as the Nepal Electricity Authority’s ( NEA ) study committee has said that it is okay to sign long-awaited power purchase agreements (PPA) with them.

    The hydropower projects in the Super Six roster are Singiti (16 MW), Khare (24.1 MW), Upper Solu (23.5 MW), Lower Solu (82 MW), Maya Khola (14.9 MW) and Mewa Khola (50 MW). They obtained survey licences through an open competition and have been waiting for their PPAs for more than two years.

    The NEA has been reluctant to sign PPAs with these projects for two main reasons — inadequate funds to build transmission lines to evacuate power from these projects and inability to sign the PPA in US dollars.

    The project developers, in particular the developer of Lower Solu, had been demanding that the agreement be made in US dollars as they had sought loans to build their projects in that currency. While awarding the projects, the NEA had promised to erect power lines on its own to link them to the national power grid.

    NEA board member Laxman Agrawal, who led the study committee, said they had asked the government to sign PPAs with the Super Six projects as they had been waiting to do so for a long time. He added that as the government had received soft loans from India’s EXIM Bank to construct power lines, the PPA process should be expedited.

    Agrawal said the committee report would be discussed at the Energy Ministry and then presented to the NEA board. “After the board approves the report, the NEA will sign PPAs with the Super Six projects,” he said.

    In the first week of June, EXIM Bank of India agreed to provide soft loans worth US$ 155 million to build three projects. It had made loan pledges of US$ 90 million for the 220-kv Koshi Corridor Transmission Line Project and US$ 29 million for the 132 kv Solu Corridor Transmission Line Project.

    Moreover, the government’s budget for the current fiscal year has allotted Rs 13.5 billion to build 456 km of power lines. “With this kind of money, the NEA can build transmission lines necessary for the six projects,” said Agrawal. However, the committee report submitted to Energy Minister Umakant Jha on Friday has asked the government to sign the PPAs in Nepali currency despite the request of the developers for US dollar contracts.

    The NEA has fixed the PPA rate for run-of-the-river projects under 25 MW at Rs 8.40 per unit during the dry season, and Rs 4.80 per unit during the wet season. The PPA rate for projects bigger than 25 MW will be fixed by negotiations between the NEA and the hydropower developers.

    With the Lower Solu project asking for a dollar PPA, the committee has also recommended measures for signing such deals. The report has suggested that 55 percent of the payment be made in dollars and the rest in rupees for projects being developed with foreign currency loans.

    “This will be applicable once the project begins commercial operation and remain effective for only 10 years,” said Agrawal. “We have fixed a time limit of 10 years with the assumption that the project will have repaid its loan by then.”

    “The NEA will bear the foreign exchange risk for which the project will have to give free energy to the government worth Rs 3 billion,” said a committee member. He added that the project would have to provide free energy to the NEA regardless of fluctuations in the exchange rate. The exchange rate will be fixed at Rs 90 per US dollar in the PPA.

    The committee has formulated the payment modality and considered the foreign exchange risk with the Lower Solu project in mind which is being developed with foreign loan. A committee member said the same would apply to the rest of the Super Six projects if they were to be developed with foreign loans.

    Source : The Kathmandu Post