Upper Karnali power purchase pact final

Kathmandu, December 20

The Bangladeshi government has finalised the power purchase agreement with GMR, developer of the 900-megawatt Upper Karnali Hydro Electric Project, paving the way for the financial closure of the project.

On December 18, the Cabinet Committee on Public Purchase approved the power purchase agreement rate to purchase 500 megawatts of energy generated by the project.

As per the decision of CCPP, Bangladesh will import the electricity through Indian firm GMR at a tariff rate of 7.72 cents (equivalent to Rs 8.80) per unit for a period of 25 years.

KK Sharma, project head of UKHEP, said the Bangladeshi government will soon sign the letter of intent with GMR and finalise other necessary legal issues to materialise the agreement. He added that GMR is accelerating the pace to complete the necessary work for energy trade and working towards the project’s financial closure by 2020.

“We have finalised the PPA with the Bangladeshi government and the process of LoI and financial closure will soon start,” said Sharma.

On November 21, Bangladeshi State Minister for Power, Energy and Mineral Resources Nasrul Hamid, speaking at the inaugural ceremony of the seventh Power Summit in Kathmandu, had hinted that they would get the PPA rate endorsed from their Cabinet at the earliest.

According to Sharma, UKHEP will be the first private Nepal-based company to export hydropower to Bangladesh via India as per a trilateral agreement. “It will also open the door for Nepal’s energy export to India and other neighbouring countries.”

The project cost of UKHEP is estimated to hover around $1.1 billion. As per GMR, the company plans to collect 15 per cent of investment through Nepali banks and financial institutions and the initial agreement has been made with them. Nabil Bank and Nepal Investment Bank have shown interest to lead the debt consortium for the 15 per cent financing.

“We are also in negotiations with Indian Exim Bank, Chinese Exim Bank, Asian Development Bank, World Bank and Netherlands Development Finance Company and other multilateral lenders for the remaining project financing,” Sharma added.

According to GMR, the project will be built as per engineering, procurement and construction model and the contract will be awarded to the selected firms by March if everything goes as planned.

GMR has selected three companies for civil, hydromechanical and other infrastructure works and seven companies for electromechanical works through open bidding.

The Bangladeshi government has already inked an agreement with GMR and the Nepal government to purchase 500 megawatts of power from the project.

GMR added that it had signed an MoU with NTPC Vidyut Vyapar Nigam Ltd of India for sale of surplus electricity generated by the project. It is also trying to sign an off-take agreement with Bangladesh Power Development Board.

Nepal will get 108 megawatts (12 per cent) of power and 27 per cent equity from the Upper Karnali project free of cost. The reservoir project has been modelled to run in full capacity for only three months in a year. It is being constructed under the build-own-operate-transfer model. As per the project development pact, the project will be handed over to the government after 30 years.

However, the land acquisition process is yet to be finalised as the landownership certificates were destroyed in an arson attack during the Maoist insurgency. “We have to first sort out the land ownership issue before we can start providing compensation to the rightful owners,” said Sharma.