Nepal | March 30, 2020

IPPAN calls for refinance facility to hydro projects

• Urges extension of terms of PDA, PPA• Asks IB to push insurance firms to expedite claim settlement

Himalayan News Service

KATHMANDU: The umbrella body of private sector power producers has called on the government to make arrangement for refinance facility, extend the term of project development agreement (PDA) and power purchase agreement (PPA), and push insurance companies to expedite claim settlement process in a bid to provide relief to hydroelectric projects damaged by the earthquake.

The earthquake of April 25 and subsequent aftershocks are estimated to have caused damage of Rs 2.30 billion to around 19 hydroelectric projects built by the private sector.

Of the projects hit by the earthquake, only five have resumed operation, upon completion of repair works, mostly temporary in nature, according to the Independent Power Producers’ Association Nepal (IPPAN). Others are yet to restart their operation, reducing electricity supply to the national grid by around 80 megawatts.

“Because of halt in power generation, income streams of many projects have been severely affected, making them unable to pay loan installments,” IPPAN President Khadga Bahadur Bisht told journalists at a press meet held here today.

If hydro sector borrowers fail to pay loan installments, banks and financial institutions (BFIs) will be forced to set aside additional funds to cover potential lending risks. This will, in turn, hit profitability of BFIs.

“We, thus, request Nepal Rastra Bank to ease criteria on loan-loss provision so that BFIs do not have to allocate extra funds to cover the lending risk,” Bisht said, adding, “Also, refinancing facility with interest rate of 5.5 per cent, or below, should be introduced for reconstruction of projects damaged by the quake.”

Although most of the hydro projects developed by the private sector are said to be insured, many have said they have not been able to collect payments due to delay in evaluation of losses.

“The Insurance Board (IB) must direct insurance companies to assess the damage at the earliest and extend advance payment. This will provide us with much-needed financial resources required to rebuild the damaged projects,” Bisht said.

Also, terms of PDA and PPA of damaged projects should be extended considering project developers’ inability to generate power at the moment, Bisht added.

Among others, IPPAN has urged the government to activate force majeure clause prevalent in agreements so that project developers are exempt from fines that Nepal Electricity Authority — the sole buyer of power here — slaps for not being able to supply electricity.

It has also asked the government to conduct geological surveys in areas where hydro plants are located so that critical infrastructure could be built in safer areas.


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