ADB ‘dissatisfied’ with performance of major energy sector projects

Kathmandu, January 30

The country was able to utilise only $30.6 million of the Asian Development Bank (ADB)’s funding pledged for energy sector projects worth $444.2 million till the end of 2015.

Energy sector projects cover 26 per cent of the net available funding amount of $1.7 billion. However, slow project implementation has been affecting the said projects.

Among the five energy sector projects funded by ADB, a large chunk of commitment is for the 140 megawatt Tanahu Hydropower Project and the Electricity Transmission Expansion and Supply Improvement Project.

ADB, during the country portfolio review mission held here last week, had shown dissatisfaction over the performance of the projects. ADB has made a commitment of $135.43 million as loan for Tanahu Hydropower Project and $68.63 million for Electricity Transmission Expansion and Supply Improvement Project.

ADB and Nepal Electricity Authority (NEA) had signed a project agreement for the implementation of the Electricity Transmission Expansion and Supply Improvement Project in April 2012. The project deals with improving the reliability of energy supply in Nepal and strengthening the transmission infrastructure needed to promote Nepal’s capacity for cross-border energy trade.

Electricity transmission capacity expansion, strengthening of distribution systems including those along the Tamakoshi (Khimti)-Kathmandu transmission line, and rehabilitation of selected small hydropower plants are the components of the project.

ADB has said that except for Electricity Transmission Expansion and Supply Improvement Project and Tanahu Hydropower Project, rest of the projects are on track. NEA and Tanahu Hydropower Ltd are the executing agencies for these two projects, which have failed to deliver the desired output in 2015.

ADB has identified delay in land acquisition, right of way (RoW) and forest clearance, limited manpower in project implementation agency, and insufficient project management capacity as the major obstacles in the timely implementation of the energy projects.

Poor financial health of NEA has also been identified as a barrier to enhance its capacity in project implementation. In this regard, ADB has suggested the government to begin full-fledged implementation of NEA’s financial restructuring plan, rationalise electricity tariff and devise an effective plan for loss reduction to improve NEA’s institutional capacity in project implementation.

This year, ADB expects that the country will be able to utilise over $139 million in implementation of energy sector projects against $30.6 million in 2015. ADB has also been providing support for Energy Access and Efficiency Improvement Project, Detailed Engineering Study for Upper Seti and SASEC Power System Expansion Project, apart from Tanahu Hydro Project and Electricity Transmission Expansion and Supply Improvement Project.