KATHMANDU, FEB 04 - Fresh from completing project development agreements (PDA) for two 900 MW hydro plants, the Upper Karnali and the Arun III, an elated Investment Board Nepal (IBN) is gearing up to start formal negotiations for the 650 MW Tamakoshi III Hydropower Project.
IBN said the PDA negotiations with Norwegian company Statkraft would start by the third week of February. The board had initially held talks with SN Power which is owned by Statkraft and Norfund. The negotiations will now be conducted with Statkraft as it has been assigned to look after the Nepal business.
An IBN board meeting held last November had decided to extend the project negotiation agreement (PNA) for the Tamakoshi III by six months under which the PDA is negotiated.
A PNA with a validity of 18 months had been signed in April 2013 with the motive of assuring the tenure of the project as the survey licence had expired.
The government had issued the license for the project to SN Power in March 2007. As per the Electricity Act 1992, the tenure of a survey license is automatically terminated if no progress is made within five years from the date of issue.
“We have been holding discussions regarding the project for the past one and a half years. The formal negotiations will start soon,” said Radhesh Pant, chief executive officer of IBN.
According to Pant, IBN is highly optimistic about signing an agreement within the designated time frame of April-end as a landmark power trade agreement (PTA) with India has been sealed.
“The major concern of the Norwegian company, the project developer, was market. Since the PTA has ensured buying and selling of electricity like other commodities between two countries, many of their issues have been addressed,” Pant said.
Since there is also a PDA template in place, the agreement is likely to be sealed soon.
The project’s future was uncertain until the PTA was signed in October 2014. The Nepal Electricity Authority (NEA) had been unable to assure a market for the proposed project thinking that the country would have surplus energy during the wet season by 2017 or 2018.
Meanwhile, IBN has asked the project developers to present a cost estimate. The cost will be adjusted with IBN’s financial model and the rate of return from the project will also be calculated.
The hydro project to be developed on the Tamakoshi River situated in Dolkha and Ramechhap districts is estimated to cost around Rs 111.3 billion.
Likewise, a thorough discussion will be held regarding the long-term pricing of the energy produced, keeping in mind the project’s completion date. “Every project is different in nature. The Tamakoshi III will require a long tunnel. Hence, the per MW cost of energy will be higher compared to the Upper Karnali and Arun III projects,” Pant said.
Issues regarding equity, free energy for Nepal and shares for locals, among others, will be discussed based on the project’s financial rate of return.
According to Ghanashyam Ojha, head of external affairs at IBN, a board meeting which is likely to be held in the next two weeks will lay a course for the PDA negotiations.
“We are planning for a board meeting very soon. The meeting will form a negotiation team which will then set a date for starting talks,” Ojha said.
The IBN board meeting is chaired by the Prime Minister. More than a dozen meetings between the government and the project developer have failed to yield a concrete result so far.