The Nepal Electricity Authority (NEA) is set to ban the promoters of Bhotekoshi (45 MW) and Khimti (60 MW) hydropower projects from investing on other projects if they do not agree to review the power purchase agreement (PPA) done in dollars.
NEA has taken a decision to impose ban if Khimti’s promoter Himal Power Limited and Bhotekoshi Hydropower Company refuse to review their PPA and bear the royalty to be paid to the government. The 650th board meeting of NEA held in the third week of March chaired by Chief Secretary Lila Mani Paudel had directed the management to initiate dialogue with the promoters to do PPA in Nepali currency at a lower rate and ask the companies concerned to bear the royalty. Paudel has quit as NEA Chairman since then. The NEA’s decision may put pressure on the promoters to review their PPA but it does not send good message to the investors.
The board has taken a decision to ban the two companies from taking part in any activities of NEA in the future if they refuse to review their PPA. NEA had signed PPA with the companies in dollars and was also bearing the two percent loyalty. The electricity produced by these companies cost around Rs 9 per unit. The agreements with the companies state that PPA and other provisions can be reviewed only through mutual understanding of both the parties concerned. The projects to be constructed by SN Power Holding, Singapore and Butwal Power Company Limited (BPC) are set to be affected if Khimti’s promoter Himal refuses NEA’s proposal for review of PPA. SN Power is developing 600 MW Tamakoshi III reservoir project and BPC Nyadi (30 MW) and Kabeli A (37.5 MW).
SN has proposed to sell electricity to NEA during the dry season while BPC is waiting to sign PPA for the two projects. Bhotekoshi, which has been generating electricity since 2001, has not received license for any other projects. Nepali investor Tara Management has 95 percent stake in Bhotekoshi after buying the shares of American company Panda Energy while American Harja International Development Company has a five percent stake in the company. SN Power has 57 percent stake in Himal, BPC has 17 and BK of Norway 26. Khimti has been producing electricity since June, 2000. NEA had signed controversial PPAs for the two projects on take or pay basis in dollars. The agreements state that NEA has to procure even the surplus electricity if the two projects generate extra energy during the wet season. Himal had last year rejected NEA’s proposal for review of PPA.
NEA has been spending over 45 percent of its income in payment for electricity purchased from Khimti and Bhotekoshi projects. The liability of NEA has further increased due to rise in the exchange rate of dollar in recent times. NEA, which is paying two percent royalty to the government for generation of electricity from Khimti, is suffering a loss of Rs 1.41 billion from Khimti and Rs 952.10 million from Bhotekoshi every year.
NEA has already paid Rs 19.80 billion to Khimti that was built at a cost of US$ 140 million (around Rs 10.36 billion) while it has also spent an additional Rs 456.99 million in royalty and fees in the period. NEA is similarly suffering a loss of Rs 2.65 in every unit of electricity purchased from Bhotekoshi with which PPA was done at six cent per unit.
NEA has taken a decision to impose ban if Khimti’s promoter Himal Power Limited and Bhotekoshi Hydropower Company refuse to review their PPA and bear the royalty to be paid to the government. The 650th board meeting of NEA held in the third week of March chaired by Chief Secretary Lila Mani Paudel had directed the management to initiate dialogue with the promoters to do PPA in Nepali currency at a lower rate and ask the companies concerned to bear the royalty. Paudel has quit as NEA Chairman since then. The NEA’s decision may put pressure on the promoters to review their PPA but it does not send good message to the investors.
The board has taken a decision to ban the two companies from taking part in any activities of NEA in the future if they refuse to review their PPA. NEA had signed PPA with the companies in dollars and was also bearing the two percent loyalty. The electricity produced by these companies cost around Rs 9 per unit. The agreements with the companies state that PPA and other provisions can be reviewed only through mutual understanding of both the parties concerned. The projects to be constructed by SN Power Holding, Singapore and Butwal Power Company Limited (BPC) are set to be affected if Khimti’s promoter Himal refuses NEA’s proposal for review of PPA. SN Power is developing 600 MW Tamakoshi III reservoir project and BPC Nyadi (30 MW) and Kabeli A (37.5 MW).
SN has proposed to sell electricity to NEA during the dry season while BPC is waiting to sign PPA for the two projects. Bhotekoshi, which has been generating electricity since 2001, has not received license for any other projects. Nepali investor Tara Management has 95 percent stake in Bhotekoshi after buying the shares of American company Panda Energy while American Harja International Development Company has a five percent stake in the company. SN Power has 57 percent stake in Himal, BPC has 17 and BK of Norway 26. Khimti has been producing electricity since June, 2000. NEA had signed controversial PPAs for the two projects on take or pay basis in dollars. The agreements state that NEA has to procure even the surplus electricity if the two projects generate extra energy during the wet season. Himal had last year rejected NEA’s proposal for review of PPA.
NEA has been spending over 45 percent of its income in payment for electricity purchased from Khimti and Bhotekoshi projects. The liability of NEA has further increased due to rise in the exchange rate of dollar in recent times. NEA, which is paying two percent royalty to the government for generation of electricity from Khimti, is suffering a loss of Rs 1.41 billion from Khimti and Rs 952.10 million from Bhotekoshi every year.
NEA has already paid Rs 19.80 billion to Khimti that was built at a cost of US$ 140 million (around Rs 10.36 billion) while it has also spent an additional Rs 456.99 million in royalty and fees in the period. NEA is similarly suffering a loss of Rs 2.65 in every unit of electricity purchased from Bhotekoshi with which PPA was done at six cent per unit.
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