ENERGY Dollar Dealing

As the Ministry of Energy is in the process of allowing NEA to sign the PPA in US dollars, the energy starved-nation can hope to attract foreign investment in the power sector

Feb. 20, 2016, 5:45 p.m. Published in Magazine Issue: Vol:09,No 15, February 19, 2016 (Falgun 7,2072)

Deputy prime minister and energy minister Top BahadurRayamajhi has announced that the government will direct the Nepal Electricity Authority to pavethe way for the Power Purchase Agreement to be signed in US dollars.

“Our priority will be to attract investment in the power sector. Given the growing demand, Nepal needs a mammoth foreign investment in the power sector. Thus, the Ministry will revoke its earlier direction and allow NEA to sign PPA in dollars,” said minister Rayamajhi. “We want foreign investment in hydropower sector.We need to sign PPA in dollars. However, we will take a cautious approach not to add additional and long term burdens.”

With the direction of Ministry of Energy and Public Accounts Committee of Legislature Parliament, Nepal Electricity Authority had stopped signing Power Purchase Agreement in US dollars. With this decision, many probable foreign investors left Nepal.

If the Ministry directs NEA to allow the power purchase in dollars, this will benefit the 216-MW upper Trishuli A Project. An international consortium is trying to build the Upper Trishuli project.

The Korean consortium has already spent several million dollars on the project and is now working to open the road up to the project site as it was badly damaged by the April earthquake.

Currently, 50 per cent shares of the KWEDC are owned by Korea South East Power Company (KOSEP), 15 per cent by Daelim, 10 percent by Kyeryong Construction and the remaining 25 percent by Bikesh Pradhananga. International Finance Corporation (IFC) of the World Bank group is eventually planning to take up 15 per cent of the stakes.

With no major power project under construction or proposed, Nepal is heading towards a prolonged energy crisis for decades. Facing a severe energy crisis, with 14 hours of load shedding every day, Nepal signed an agreement with an Indian company to import additional 80 MW of power through newly completedDhalkebar-Muzaffarpur Transmission line. After the import, Nepal’s total import of power from India is likely to reach over 300 MW.

Nepal Electricity Authority paid over Rs. 14 billion last year and now the import bill will go up to Rs.20 billion. As the demand of electricity is increasing, Nepal’s current rate of construction is inadequate to meet the demand. As hydropower requires a huge money, Nepal needs to mobilize as much in investment.

Even as Nepal needed to attract foreign investment, foreign investors were leaving the country following the direction of Ministry of Energy to suspend the dollar PPA for the time being and the government plan to purchase additional power from India.

At a function organized by Nepal Energy Journalists, Minister for Energy Top BahadurRayamajhi disclosed that the ministry is opening the dollar PPA. “Nepal needs to produce hydropower to fulfill its internal demands.Without opening the PPA on dollar basis, Nepal’s mission to produce electricity will be impossible,” said Rayamajhi.

Nepal is currently importing 310 MW of power from India. Similarly, Nepal imports over 110 billion of rupees of fossil fuel to meet the energy needs.

There was a long debate on whether to sign PPA in dollar or not. Sujit Acharya, executive director of Energy Development Council said Nepal should not sign PPA in dollars. He argued that rather Nepal can sign PPA in Indian Currency. “Nepal has enough money on its own to invest in hydropower. We can mobilize our own resources from the market. Thus, there is no need to have any foreign investment,” said Acharya.

Others disagree. “Our resources alone are not enough to build large projects. If we want to be self-sufficient in power sector, we need foreign investment and we need to sign PPA with those who invest in dollars,” said energy secretary Suman Kumar Sharma.

In the context when Nepal is paying over 130 billion rupees of foreign currency to import petroleum products and electricity from other countries, nobody seesany rationale behind the argument that Nepal cannot pay the dollars for those who invest in dollar for power generation in Nepal.

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