Nepal | August 06, 2020

Govt yet to take 50pc ownership of Khimti hydel

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Since the government has been unable to draft the necessary documents to take 50 per cent ownership of Khimti Hydropower Project, the fate of the 60-megawatt project has landed in uncertainty.

As per the project development agreement inked on January 15, 1996, Nepal Electricity Authority (NEA) had to take 50 per cent ownership of the project by July 11 this year.

Citing the problems posed by the outbreak of the coronavirus pandemic, both NEA and the Ministry of Energy, Water Resources and Irrigation (MoEWRI) have not made any preparations to ink a new agreement.

As per the project development agreement, from July 12 this year all procedures related to acquire 50 per cent ownership should have been completed by the power utility and the project should have been operating through a joint venture.

Prabin Aryal, joint secretary at MoEWRI, said that the government is preparing to introduce interim arrangements to manage and operate the Khimti Hydropower Project and that the project will not be shut down. He added that the ministry will soon finalise all the details to take 50 per cent ownership of the project.

Aryal informed that the ministry has already sent a letter to the promoter, Himal Power Ltd, for an interim management. “Even though the agreement had expired we sent a draft memorandum of understanding to the promoter company to make interim arrangements for the operation of the Khimti power plant,” he mentioned.

“We have asked Himal Power Ltd to bear the expenses of the operational cost for the time being which we will adjust later,” he said.

According to him, even though the government has reached the final stage of negotiations with Khimti’s promoters, the process of taking over Khimti has not been able to move forward as the concerned officials of the promoter company could not come to Nepal in the aftermath of the coronavirus pandemic.

Earlier, the MoEWRI had formed a team led by Joint Secretary Aryal and comprising of officials of NEA to facilitate the process but there has not been any tangible progress yet in forming the joint venture company.

Meanwhile, NEA has yet to fulfil the set preconditions before taking 50 per cent ownership from Himal Power Ltd which currently has 100 per cent ownership of the project.

Himal Power is tasked with developing the project under a 50-year lease contract with the government.

As per the project development agreement, a joint venture (JV) company needs to be formed. The JV company will then determine and certify the valuation of the project site, undertake share distribution, and determine new power purchase rate. Likewise, the company will also form a new board of directors, set up a management team and integrate employees, among others.

“We are carrying out preliminary works to establish the JV firm and formulate other necessary framework for the purpose. We believe we will complete the process after current situation gets normal,” Aryal said.

NEA had initially signed the power purchase agreement (PPA) with Khimti at 5.2 cents per unit, which was later revised to 5.9 cents. The authority is buying power at up to Rs 21 per unit of electricity generated from the project as the price of the US dollar has surged massively.

As per Himal Power, the project is generating 350GWh of energy annually, for which NEA is paying around Rs five billion. NEA has been incurring an annual loss of Rs two billion while buying power generated by Khimti.

A version of this article appears in e-paper on July 13, 2020, of The Himalayan Times.

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