Nepal | September 28, 2020

NEA delays process of taking 50pc ownership


Umesh Poudel
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Kathmandu, February 10

As Nepal Electricity Authority (NEA) has been dilly-dallying in processing the related documents to take 50 per cent ownership of Khimti Hydropower, the fate of the 60-megawatt project has landed in uncertainty.

As per the project development agreement inked on January 15, 1996, NEA has to take 50 per cent ownership of the project by July 20 this year.

However, the power utility has yet to fulfil the set preconditions before taking 50 per cent ownership from Himal Power Ltd (HPL), which currently has 100 per cent ownership of the project. The HPL 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.

A high-ranking official at NEA, seeking anonymity, said that the authority has started the initial phase of work to establish a JV company and has held a few rounds of discussion with HPL. “After the JV company is established, all the assets, shares, power purchase rates should be finalised before the shares can be transferred,” said the source, adding that the entire process would take at least three to four months.

Earlier, the Ministry of Energy, Water Resources and Irrigation had formed a team led by Joint Secretary Prabin Aryal, and comprising of officials of NEA, for the facilitation. But there has not been any tangible progress in forming the company yet.

“We are carrying out preliminary works to establish the JV firm and formulate other necessary framework for the purpose. We believe that we will complete the process before the deadline,” Aryal claimed.

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 dollar has surged massively.

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

As per the agreement, the new PPA will be signed in Nepali currency instead of dollar. After that, the power utility will minimise its loss and save Rs 400 million annually as royalty.

Meanwhile, a high-level HPL source informed that they have submitted two proposals to the NEA for further process. First, they have proposed to hike the current PPA rate and shorten the time by 10 years from 30 years. Second, the HPL has proposed to conduct due diligence audit by an independent firm and make a new system for the company.

“We recently installed and upgraded new equipment at the core technical areas. But, we are open to negotiations and any other viable option that is a win-win for both parties.”

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