KATHMANDU, Jan 7:
A team led by joint-secretary of Ministry of Energy Keshav Dhwaj Adhikari and representatives from Nepal Water and Energy Development Company (NWEDC), a consortium including a South Korean government undertaking, are sitting in the negotiations which will specify obligations of both parties for project development.
The 216-MW project is the third of its kind to enter the PDA negotiation phase after the Bhotekoshi and Khimti hydropower projects. Upon completion, the run of the river project will be largest project developed by private sector in Nepal.
Separate PDA negotiations for Upper Karnali and Arun III are underway through the Investment Board Nepal (IBN). Gokarna Raj Pantha, information officer at the Department of Electricity Development (DoED), said the project developer had already met conditions to be fulfilled before sitting in the negotiating table.
Hydropower Project Development Agreement Guidelines 2012 has made it mandatory for hydropower developers to pay US$ 1500 per MW as PDA fee.
The project has already submitted grid connection agreement to NEA, got approval for Environment Impact Assessment (EIA) report from the Ministry of Science, Technology and Environment (MoSTE), and signed 30 percent equity investment agreement with lending institutions.
South Korean government undertaking KOSEP owns 50 percent stake in the consortium. Similarly, DAELIM and International Finance Corporation – a member of the World Bank group, hold 15 percent each in the consortium. Jade Power – a Nepali power developer – and KYERYONG own 10 percent stake each.
DAELIM and KYERYONG are Korean construction companies. Total project cost has been estimated at US$ 575 million. However, government officials say the project cost is higher compared to other projects. The development cost of Upper Tamakoshi Hydropower Project (456 MW) has been estimated at $441 million.
Experts say average project cost of this scale and type hovers around $2.5 million per MW.
The NWEDC has already registered application at NEA for power purchase agreement (PPA) at the rate of 6.9 cents per MW. Pradeep Gangol, liaison officer of NWEDC, said investment security and assurance of Power Purchase Agreement (PPA) in US dollar are the major demands of the project developer.
“We either want PPA in US dollar, or assurance of investment security with rate of return at par with international standard,” added Gangol.
Nepali officials said developers are likely to demand for greater incentives and concessions on customs duty on imports of necessary construction materials as well as on income tax and VAT.
Source : Republica