PPA renegotiation to be done for Kabeli-A



    kabeli location mapThe government is all set to renegotiate with the Kabeli-A Hydropower Project to revise the rate of the power purchase agreement (PPA) for its increased capacity of 7.6 MW.

    A cabinet meeting two months ago decided on renegotiations for the additional output after the 30 MW projected was upgraded to 37.6 MW.

    Although the Ministry of Energy (MoE) and the project developer Butwal Power Company (BPC) had agreed on the PPA rate for the increased capacity too, the cabinet decision has required the ministry to arrange a fresh deal.

    The ministry is now preparing to write to BPC requesting a renegotiation of the PPA rate. “We will send the letter within a few days,” said a senior MoE official.

    “We assumed that all the financial issues had been settled, but the cabinet decision has forced us to renegotiate with the developer,” said a high-level ministry official.

    A committee led by Dilli Bahadur Singh, joint secretary at the Water and Energy Commission Secretariat, had negotiated and settled the financial matters including the PPA rate. After the negotiation, the PPA rate had been fixed at 6.21 cent per unit.

    The Nepal Electricity Authority will pay 60 percent of the bill in US dollars and 40 percent in domestic currency as per the negotiation. The payment to be made in Nepali rupees will be based on the exchange rate of the US dollar when the project contract was awarded. The ministry official admitted weaknesses on the part of the ministry as they could not communicate properly with the cabinet about the deal.

    A high-level BPC official said that though they had not been officially informed about the ministry’s recent move, it will be very unfair to the company if the MoE really intends to revise the PPA rate for the increased capacity. “All the issues had already been settled when the project’s capacity had been increased,” he said, refusing to elaborate.

    The government approved the project on Oct 7, 2009 and awarded BPC the contract to build it under the build own operates and transfer (BOOT) model with a 35-year concession period. The government signed the project development agreement with BPC to this effect on Jan 31, 2010.

    BPC has developed Kabeli Energy Limited, a special purpose vehicle, for development of the project. The company has paid Rs 12 million as tax to the government for project development.

    Source : The Kathmandu Post