KATHMANDU, Sept 11: Officials of Upper Bhotekoshi Company and Himal Power Ltd have clarified that their Power Purchase Agreements (PPAs) cannot be revised. They say the PPAs were signed in foreign currencies through negotiations and the risks were shared in order to bring in the foreign investment.
Speaking to a subcommittee of the Public Accounts Committee of parliament on Thursday, both project-developers refused to revise PPA rates signed a decade and a half ago.
Earlier, the government called on them to sit for dialogue for revising the PPA rates as this meant huge losses for Nepal Electricity Authority (NEA). The subcommittee, led by Post Bahadur Bogati, has been looking into PPAs signed in foreign currencies.
Developers of the 45-MW Upper Bhotekoshi and 60-MW Khimti projects were invited for discussions. They also said that ´rumors´ making the rounds that their projects meant huge losses to NEA were baseless.
Upper Bhotekoshi General Manager Narendra Prajapati said PPAs are long term agreements and normally such agreements are never revised. He also ruled out that his project was causing huge losses to NEA saying that his company may have got only an additional Rs 200 million in the last fiscal year due to differential rates caused by currency exchange and said the amount was peanuts in NEA´s total loss of Rs 5.75 billion in the year.
Himal Power Ltd General Manager Tom Kristian Larsen said their PPA was completely transparent and on commercial parameters. “There was no experience of project-financing in Nepal at the time, and everything was agreed upon,” Larsen added.
In the beginning of the discussion, CA members had argued that the PPA rates should be revised as the developers have earned a lot of money and NEA has born the losses.
CA member Mohan Bahadur Basnet said NEA started registering a deficit from the very year both projects were connected into the national grid and the same continues.
Both projects started operation in Fiscal Year 2000/01.
CA members also questioned why both projects were earning good profits but shunned from distributing shares to locals.
Sandip Shah, the project director of Khimti, told the subcommittee that the developers were not liable to issue shares to the public and they will hand over half the ownership to NEA after 20 years of operation at zero cost. Likewise NEA will own half Upper Bhotekoshi after 25 years.
Officials of Khimti also said that paying royalty should not be looked at in isolation but along with risk sharing. NEA pays all
the royalty and other taxes for Khimti hydropower project.
Both projects also complained that two years ago NEA decided not to sign any agreement with them until they came to revise PPA rates.
Prajapati said their project faced an uncertainty after a sort of blacklisting.
Anil Sinha, the legal advisor to Khmiti, said that revising such agreements could not happen by twisting arms.
NEA signed a PPA with Upper Bhotekoshi at 6 cents US per unit in 1997 and with Khimti at 5.9 cents US in 1996. NEA statistics say that it has born huge losses due to the devaluation of the Nepali currency. At around the time of the PPAs, one US dollar was going at Rs 48 but now the exchange rate hovers at around Rs 95.
Source : Republica