Kathmandu, December 29

The Ministry of Energy (MoE) has signed project development agreement (PDA) to develop the 216-megawatt Upper Trishuli-1 Hydroelectric Project with a Korean developer — Nepal Water and Energy Development Company Pvt Ltd (NWEDCPL) — today.

The PDA has ensured the power purchase agreement (PPA) in US dollar terms for 10 years from power commissioning date or till payback period of loans obtained by the developers from international financiers, whichever is earlier. And more importantly, as per provision of PDA, government will be liable to pay for energy supplied by developer if Nepal Electricity Authority (NEA) — sole power off taker of country — fails to pay as per the power purchase agreement, which is going to be signed within the next six months.

After the PDA agreement, the developer needs to apply for the generation licence from the Department of Electricity Development within 90 days and obtain the licence within 120 days (four months).

The deadline to achieve financial closure has been set at two years from the issue date of generation licence, according to the PDA. The MoE can extend the deadline by up to a year if the company is unable to achieve the financial closure after assessing the reasons submitted by the developer.

The project, to be developed under the build-own-operate-transfer (BOOT) model, will be handed over to the government after 35 years from the issue date of generation licence. The construction period of the project is five years after the financial closure, according to Dinesh Kumar Ghimire, spokesperson for MoE.

“After obtaining the generation licence, the developer will sit for negotiations with the off-taker (NEA) for grid connection agreement.”

The PDA has mentioned the grid connection agreement needs to be signed within six months from today. NEA will negotiate on the rate of per unit electricity based on cost of project and power commissioning date and other set principles of power purchase agreement.

Apart from Korean government owned KOSEP Co holding a majority stake of 52 per cent in NWEDCPL, two Korean firms Daelim Industrial Co Ltd and Kyeryong Industrial Construction Co Ltd own 16 and 10 per cent share, respectively. Similarly, International Finance Corporation, the private sector financing wing of the World Bank Group, owns 12 per cent and BikeshPradhanang, a local partner, owns 10 per cent of the stake in NWEDCPL.

The PDA has provisioned that the company should allocate 10 per cent shares to the locals of the project-affected areas. The PDA has also envisaged a high powered committee led by minister for energy and comprising all stakeholder agencies of the government to facilitate the developer while executing the project.

The developer has estimated the total cost of developing the project would stand at $600 million. The company is preparing to finance 72.5 per cent of the project through loans and 27.5 per cent through equity investment. However, the PDA is flexible in terms of 75 to 80 per cent as loans and 25 to 20 per cent equity. The government will extend the facility to the project as per the provisions laid in the National Energy Crisis Prevention and Electricity Development Decade, the 10-year vision document of the government that was issued last year.