MoE mulls hedge fund for hydro projects
Kathmandu, September 16
The government is mulling over establishing a hedge fund to cover the risk of US dollar’s fluctuation, especially for hydropower projects built under foreign investment.
The Ministry of Energy will allow Nepal Electricity Authority (NEA) — the sole power off taker of the country — to sign power purchase agreement (PPA) in dollar terms only after the hedge fund concept takes shape, according to Energy Minister Janardan Sharma.
The issue of PPA in US dollar terms has been a topic of debate after NEA witnessed huge loss due to PPA in dollar terms with Khimti and Bhotekoshi hydropower projects as the dollar exchange rate has gone up against the Nepali currency over the period of time. However, Energy Minister Sharma today said that the government will develop a hedge fund, in which the developers willing to sign the PPA in dollars, should deposit a certain amount as premium and the government will also contribute certain amount to the fund.
This fund, according to Minister Sharma, will be utilised to cover the risk of value of Nepali currency depreciating against the dollar.
Unveiling the short- and long-term plans today at MoE, the energy minister has promised that the government will soon allocate one hydroelectricity project to Nepal Army, Nepal Police and Armed Police Force to jointly develop the project as a model project.