Upper Trishuli-1 hydroelectric project : Why the delay?

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    KATHMANDU: The developer of Upper Trishuli-1 hydroelectric project was initially planning to begin project construction in 2014. But that deadline could not be met due to delay in signing of the PDA.

    One of the reasons for delay in PDA signing — apart from frequent changes in the government — was the government’s inability to decide on whether to sign dollar-denominated PPA with the project developer as requested.

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    Upper Trishuli-1 is a project being developed by foreign investors, who have brought in US dollars to build the project. Since value of Nepali rupee has been depreciating against the greenback by 3.4 per cent per year for last one decade, these investors have sought protection against foreign exchange variation risk.

    One way to cover this risk was by signing dollar-denominated PPA, under which electricity generated by project developer would be sold to offtaker, or NEA, in US dollars throughout the concession period. But since there was no legal provision on it, MoE could not take a decision on this issue.

    However, after over-four-month-long trade blockade on Nepal-India border points disrupted supply of goods to Nepal, including petroleum products, government came up with Action Plan on National Energy Crisis Alleviation and Energy Development Decade to raise country’s dependence on domestic resources to meet energy need. This plan has paved way for signing of dollar-denominated PPA.

    As per the action plan, PPA can be signed with project developers in convertible currency for a period of 10 years to enable foreign investors to repatriate the investment they have made in Nepal-based hydro projects. After the 10-year period is over, offtaker must purchase electricity in domestic currency.

    “We actually need 12 years to pay back loans acquired from foreign lenders. But our investors have agreed to 10-year timeframe introduced by government. So, we are ready to sign PPA,” NWEDC CEO Bo-Seuk Yi sai


    Source : The Himalayan Times.