PPA structure for Kabeli hydro project revised

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    KATHMANDU, FEB 26 –

    The Cabinet has approved the Energy Ministry’s request to revise the power purchase agreement (PPA) structure for the Kabeli “A” Hydropower Project.

    The PPA will now be 60 percent US dollars and 40 percent Nepali rupees. Previously, the Cabinet had decided to sign the agreement with the ratio 53 percent US dollars and the rest Nepali rupees.

    The 37.6 MW project is located on the

    border between Panchthar and Taplejung districts in eastern Nepal. “As this project is highly competitive compared to others, the ministry had decided to revise the currency structure in the PPA,” said energy secretary Hari Ram Koirala.

    Previously, Butwal Power Company (BPC), the project developer, had pressed the ministry repeatedly to revise the structure stating that it could not sign the PPA in the previous currency model due to a depreciation of the Nepali rupee. The company had also said that a revision was necessary due to a rise in prices of construction materials.

    The Energy Ministry had then sought the approval of the Finance and Law ministries. The Law Ministry had recommended to the Energy Ministry to revise the project development agreement (PDA) as well with the project. Officials at the Nepal Electricity Authority (NEA) said that it would soon sign the PPA with the project as per the revised structure. “Though the PPA has not been signed with the project formally, it has been handed over to BPC through open bidding,” said Energy Ministry spokesperson Sri Ranjan Lackoul. He added that the PPA had been agreed with the project at US cents 6.21 per unit.

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

    The government had approved the project on Oct 7, 2009 and BPC had been awarded the contract to develop the project under the build own operate and transfer (BOOT) model through open competition with 35 years of procution licence. The government had signed the project development agreement (PDA) with BPC to this effect on Jan 31, 2010.

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

    The government has taken a loan worth US$ 40 million from the World Bank at 4 percent interest and is lending the amount to BPC for project development at 10.5 percent. A high-level ministry official said that with the revision in the PPA structure, the government is likely to charge the project a higher rate of interest than decided previously.

    The World Bank had decided to finance 40 percent of the total project cost through the Power Development Fund (PDF). Other international funding agencies and local banks were expected to provide 40 percent debt finance and the remaining 20 percent would be invested by the promoters as equity.

    The government had prepared a feasibility report for the project in 1998 as per which its annual average energy generation is estimated as 201 GWh. The report had estimated the project to cost US$ 92 million. Though the project has been scheduled to start production in September 2015, the developer has not yet begun construction work.

    Source : The Kathmandu Post