KATHMANDU, AUGUST 14
The Independent Power Producers' Association, Nepal (IPPAN) has requested the government to amend the recommendations made in the report on policy arrangements, 2023, regarding Power Purchase Agreement (PPA) stating that it will be unfair to private energy producers.
In the 10th point of the report prepared by the five-member committee under the coordination of the Joint Secretary of the Ministry of Energy, Water Resources and Irrigation, Sandip Kumar Dev, it is mentioned that priority will be given to hydropower projects promoted by the government, government-owned companies and subsidiary companies of the Nepal Electricity Authority.
Speaking at a press conference, IPPAN President Ganesh Karki mentioned that the recommendation, which proposes prioritisation of hydropower projects that are promoted through the government and Nepal Electricity Authority (NEA)'s subsidiaries, is unfair to private power producers. Karki suggested that the projects that have applied for PPA should be given priority on the 'first come, first served' basis.
"There are numerous private hydropower projects awaiting for their PPAs to be approved. If the government and the authorities prioritise only the projects that are promoted by themselves, millions of rupees in investments poured into the hydropower sector by the private sector will be in jeopardy. Arrangements should be made to approve PPAs on the basis of application submitted.
IPPAN has also drawn attention over point 13, which recommends the cancelation of PPA and confiscation of bank guarantee if the financial resources cannot be managed within two years from the date of completion of the PPA for hydropower projects with a capacity up to 100 MW, and three years in the case of projects above 100 MW.
"Even after the PPA is completed, getting loan investment within two or three years is difficult for the private producers following the surge in investment crisis in the wake of COVID-19. Financial resources can be managed within the said time only if the government and the Nepal Rastra Bank (NRB) direct the banks and financial institutions to allocate 20 per cent of the total disbursed loans to the hydropower sector," Karki shared.
He also said that the association will recommend the government to set a time limit of three years for projects up to 100 MW, four years for projects up to 500 MW, and five years for projects above 500 MW for the management of financial resources. He said that due to a lack of liquidity, the private sector is demanding extension of special period of one year as it is not fair to cancel the PPA and permit of the hydropower project, which has not been able to get the investment from the bank.
Senior Vice-President of IPPAN, Mohan Kumar Dangi said that while most of the demands of private power producers have been addressed, there are still concerns over a few points. He also shared that the private sector has welcomed the provisions recommended to maximise the use of water resources, among others.
Balram Khatiwada, general secretary of IPPAN, said that the removal of the 'cap', which required only 17 per cent return on investment, was welcomed in the case of run-of-the-river (RoR) and semi-reservoir (PRoR) hydropower projects with a capacity more than 100 MW.
On February 9, 2023, the 930th board meeting of NEA formed a five-member committee under the coordination of Joint Secretary Dev to make policy changes in relation to the PPAs. The committee has recommended 16 points regarding the PPAs of the hydropower projects and related matters. The panel had recommended the government to take strict measures as the construction of many projects had not progressed even after the PPA was signed.
A version of this article appears in the print on August 15, 2023, of The Himalayan Times.
