Kathmandu, November 21

The Bangladeshi government and GMR, developer of the 900-megawatt Upper Karnali Hydro Electric Project (UKHEP), have finalised the power purchase agreement (PPA) rate to purchase 500 megawatts of energy from Nepal.

Speaking at the inaugural ceremony of the seventh Power Summit-2019 here today, Bangladeshi State Minister for Power, Energy and Mineral Resources Nasrul Hamid said they have recently finalised the PPA rate.

Hamid further said the PPA has been submitted to the Bangladeshi Cabinet for approval. “Once our Cabinet endorses the PPA rate, we will disclose the rate that we will be paying for each unit of electricity to GMR,” he said, adding that due to sensitivity of the issue for both parties, he didn’t want to disclose the PPA rate at present. GMR has inked the PPA with Bangladesh on US dollar basis.

According to SN Barde, chief executive officer of GMR-energy, they will be the first company to export Nepal’s hydropower energy to Bangladesh via India as per a trilateral agreement. “It will open the door for Nepal’s energy export to India and other neighbouring countries too.”

Barde further said that GMR is accelerating the pace to complete the necessary works for energy trade with Bangladesh. “We also are working towards the project’s financial closure by next year.”

The project cost is estimated to hover around $1.1 billion. As per Barde, the company has plans to collect 15 per cent of investment through Nepali banks and financial institutions. As per him, Nabil Bank and Nepal Investment Bank have shown interest to lead the debt consortium for the 15 per cent financing. “We are also in negotiations with Indian Exim Bank, Chinese Exim Bank, Asian Development Bank, World Bank and Netherlands Development Finance Company (FMO) and other multilateral lenders for the remaining financing for the project.”

According to GMR, the project will be built as per engineering, procurement and construction (EPC) model and the contract will be awarded to the selected firms by March 2020 if everything goes as planned.

The company has initially selected three companies for civil, hydromechanical and other infrastructure works and seven companies for electromechanical works through open bidding.

Earlier, the company had said that it was holding high-level discussions and negotiations with the government of Nepal, Investment Board Nepal, and government of Bangladesh and various Indian state governments, including Uttar Pradesh, Bihar, Haryana and Punjab, and other concerned stakeholders to sell the generated energy.

In this regard, the Bangladeshi government has already inked an agreement with GMR and also with Nepal government to purchase 500 megawatts of power from the project.

The company further said that it has signed a memorandum of understanding with NTPC Vidyut Vyapar Nigam Ltd of India for sale of surplus electricity generated by the project. Similarly, the company is trying to sign an off-take agreement with Bangladesh Power Development Board.

Nepal will get 108 megawatts (12 per cent) of power and 27 per cent equity from the Upper Karnali project free of cost. The reservoir project has been modelled to run in full capacity for only three months in a year. It is being constructed under the build-own-operate-transfer (BOOT) model. As per the project development agreement, the project will be handed over to the government after 30 years.