NEA to sign PPA in dollars after 4-year gap

This is the first dollar-denominated PPA that NEA is signing since the introduction of the new PPA guidelines, which have paved the way for projects being built with foreign investment to sell electricity to the state-owned power utility in convertible currency

Nov 5, 2017-Nepal Electricity Authority (NEA), the state-owned power utility, is all set to sign dollar-denominated power-purchase agreement (PPA) with Langtang Rasuwa Hydropower Limited, the developer of 120MW Rasuwa-Bhotekoshi Hydropower Project.

This is the first dollar-denominated PPA that NEA is signing since the introduction of the new PPA guidelines, which have paved the way for projects being built with foreign investment to sell electricity to the state-owned power utility in convertible currency. NEA had last signed dollar-denominated PPA around four years ago.

This agreement, according to NEA, is very important as it will set precedence for signing of other dollar-denominated PPAs in the future.

Once this pact is signed, it will open the gates for signing of PPA between NEA and Nepal Water and Energy Development Company (NWEDC), the developer of the 216MW Upper Trishuli-1 Hydropower Project. NWDEC signed project development agreement with the Energy Ministry 10 months ago. But it has not been able to sign PPA with NEA, as both the parties have locked horns over the portion of the project cost which would be covered by dollar-denominated PPA.

During discussions, NEA offered to cover 70 percent of the project cost whereas the developer has requested that the proportion be raised to 85 percent. “Now the precedence is going to be set,” said Prabal Adhikari, chief of NEA’s power trading department. “Other project will be get deal similar to 120MW Rasuwa-Bhotekoshi project.”

The meeting of the board of directors of the power utility held last week approved the PPA template of Rasuwa-Bhotekoshi project tabled by the NEA management. The agreement, according to NEA, will be signed within a week.

“It will not take much time to sign the PPA, as negotiations are over,” said Adhikari. “We will sign the PPA after the developer deposits Rs 120 million as bank guarantee fee.”

The agreement, according to NEA, will be signed as per the PPA guideline issued by the Energy Ministry in April. This means the Rasuwa-based run-of-the-river type project will sell per unit of electricity to NEA at Rs4.80 during the wet season and at Rs8.40 during the dry season. The payment, however, will be made in US dollar as per the exchange rate of the day when the PPA is signed.

As per the guidelines issued by the Energy Ministry, NEA will make payment in convertible currency for a period of 10 years or until the time the project pays back the foreign debt whichever is earlier. NEA, however, cannot sign dollar-denominated PPA with projects if portion of foreign debt exceeds 80 percent of the total project cost.

Source: The Kathmandu Post