Kathmandu, February 10

The Bangladeshi government has granted letter of intent (LoI) to GMR to ink the power purchase agreement to buy 500 megawatts of electricity from the 900-megawatt Upper Karnali Hydro Electric Project (UKHEP).

KK Sharma, project head of UKHEP, informed that the Bangladeshi government has paved the way for the project to ink the financial closure with various banks and financial institutions. “The LoI means that the Bangladeshi government has finalised all necessary legal issues to materialise the plan to buy energy from us,” he clarified.

Earlier, the Bangladeshi government had finalised the power purchase agreement rate with GMR, developer of the project on December 18. At that time the Cabinet Committee on Public Purchase of Bangladesh had approved power purchase agreement rate to purchase 500 megawatts of energy generated by the project.

As per the cabinet decision, Bangladesh will import 500MW of electricity through Indian firm GMR at a tariff rate of 7.72 cents (Rs 8.80) per unit for a period of 25 years.

Sharma further said they will complete the necessary works for the power purchase agreement within the next four months and by the next six months the project will ink the financial closure agreement.

“If everything moves ahead as planned then we will be able to ink the power purchase agreement by June and we also plan to complete the process of engineering, procurement and construction (EPC) and award the contract to the selected firm by March,” Sharma informed.

The Upper Karnali Hydro Electric Project will be the first private Nepal-based company to export hydropower to Bangladesh via India as per a trilateral agreement.

The project cost of UKHEP is estimated to hover around $1.1 billion.

As per GMR, the company plans to collect 15 per cent of investment through Nepali banks and financial institutions and the initial agreement for the purpose has already been signed. Nabil Bank and Nepal Investment Bank have shown interest to lead the debt consortium for the 15 per cent financing.

Sharma further said the project is in talks with the Indian Exim Bank, Chinese Exim Bank, Asian Development Bank, World Bank and Netherlands Development Finance Company and other multilateral lenders for the remaining project financing.

“We are planning to award the project construction contract to the selected firm by March as per the engineering, procurement and construction model,” he informed.