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Hydro-Power Summit, 14-15 March 2012, concludes in Kathmandu

After four-years, power developers from Nepal and India again gathered in Kathmandu for the 2 day Hydropower Summit 2012, which took place on March 14 and 15. The Summit was hosted in partnership with BP Koirala India -Nepal Foundation (BPKINF), Federation of Nepalese Chambers of Commerce & Industry (FNCCI), Confederation of Indian Industries (CII), Nepal-India Chamber of Commerce & Industry (NICCI), Independent Power Producers Association of Nepal (IPPAN), EXIM Bank of India and Society of Economic Journalists of Nepal (SEJON).

Inaugural Session

Addressing the inaugural session of Hydropower Summit 2012, Chief Guest Prime Minister Dr. Babu Ram Bhattarai said "Nepal government will focus its attention on developing the hydropower sector which will not only boost economic development of the country but also accelerate the overall development," Mr. Bhattarai further pointed out that hydropower is not an end-product, but an intermediary material that holds the key to the growth of other sectors including agriculture, tourism, manufacturing, information and communication services with enhanced production capability of the country through rapid industrialization. He also said the government is working towards the formation of an Infrastructure Bank in the country to help people invest in hydropower projects. Indicating at the country’s present banking system’s limit in meeting the financing needs of hydropower developers, he said the government has also proposed an amendment in the existing Banking Law for the creation of the Infrastructure Bank.

According top priority to the development of hydropower sector in the country, Prime Minister Baburam Bhattarai on Wednesday coined a new slogan, “Democracy plus Hydropower equals to New Nepal.” Just as the politics of the country cannot be developed without the establishment of democracy, economy cannot flourish without development of the hydropower sector, he said.

He also informed that the government will soon hold a Power Trade Agreement with India that is expected to resolve the problem of market imperfections in electricity trade. “It’s essential to hold such agreement with neighbouring countries as the electricity produced in Nepal will not only benefit it but also to India, Bangladesh and the entire South Asian region,” he said, pitching for a national strategy should be to export energy so that the country can generate resources for further investments, meet foreign currency needs for essential imports and attract investment for additional hydropower development.

Inviting Indian businessmen to invest in this country's hydropower sector Dr. Bhattarai promised to create a conducive environment for them. He said the government would focus on exploiting the huge potential of hydropower of Nepal once the six-year-long peace process concludes.

Minister for Water Resources Posta Bahadur Bogatisaid the government of Nepal accords special priority to the storage type of hydropower project and expressed his commitment to construct medium range power projects like the Upper Karnali and Arun Third Projects, currently being considered by Indian power companies GMR and Sutlej, by signing power purchase agreements.

Speaking on the occasion, Energy Minister Bogati said that the government is holding talks with developers for the implementation of the projects whose design has already been completed. “Within two months, the ministry will conclude Power Development Agreement with all developers who have applied for it,” said Bogati adding that the government has lately announced several measures including the review of Power Purchase Agreement (PPA) in an attempt to help developers complete their projects within the stipulated time.

Mr. Bogati further said that the government is working to enhance the capacity of the installed projects as a measure to ensure normal power supply in the country. “To better supply the produced electricity from the mega projects, the government has already decided to form a separate transmission company,” said Mr. Bogati. 

Similarly, Minister for Irrigation Mahendra Yadavunderlined the need to further enhance cooperation between Nepal and India on developing hydropower projects that would help minimise water- related disasters and provide irrigation benefits to both the countries. He also hailed government of India for providing financial assistance to build embankments in various rivers in southern Nepal.

Indian Ambassador to Nepal Jayant Prasadsaid that Indian investors are willing to make huge investments in Nepal's hydropower sector once favourable conditions are created. He said the development of hydropower sector will not only benefit Nepal economically but will also help in reducing carbon emission in the entire South Asian region. Hydropower development can create new employment opportunities, enhance economic development and also reduce trade imbalance of Nepal, he noted.

Pointing to Nepal’s growing trade deficit, Indian Ambassador to Nepal Jayanta Prashad said the country should shift hydropower into a trading commodity. “As the development of hydropower ensures creation of jobs and collection of revenue, the government should place high priority for this sector,” suggested Mr. Prashad.

Indian Ambassador Prasad underlined the need of promoting joint-venture for the development of hydropower sector in both the countries and added that the Indian Government was committed to extending all possible support to that end.

Suraj Vaidya, President of Federation of Nepalese Chambers of Commerce and Industry (FNCCI)warned that the country would never achieve economic prosperity if the political parties still keep on wrangling over the hydropower issues. “This sector should be free from all sorts of political games and the investors should be given a platform for their investment,” said Mr. Vaidya.

He underscored the need of motivating private sector for investing in the hydropower sector.

Subarna Das Shrestha, President of IPPAN said“The idea behind holding the summit is to discuss on investment climate in hydropower sector, how to work together with recently formed Investment Board and to chart out policies required to expedite hydropower development.”

“The enthusiasm that we saw five-six years ago has slowed down, especially in last two years. Hence, this summit is also for giving new momentum.” said Mr. Shrestha.

Member Secretary of Indian Development Commission Sudha Pillai put forth their views on the occasion.

Sanjiv Keshava, President of NICCI introduced and highlighted on the Hydro Power Summit 2012.

The summit bears much significance also because of the fact that it is being organized at the time when uncertainty among potential foreign investors are skeptic over making investment in Nepal’s power sector due to a series of disturbances and lack of a stable regulatory framework. It was also momentous because, besides hostilities at the ground level, international hydropower developers are also faced with problems related to government indecision over Power Development Agreement (PDA). 

Investors seek assurance from the government through the PDA in averting any possible uncertainties during the construction phase of the projects. The projects can proceed onto construction phase after the completion of the PDAs.

PDAs of as many as seven projects have been stalled, with no progress made on the Upper Karnali (900 MW), Tamakoshi 3A (880 MW), Upper Marsyangdi (600 MW), Arun III (402 MW), Lower Arun (400 MW), Balefi (50 MW) and Likhu (34 MW) for around two years.

In the two-day summit that drew representatives from 22 Indian companies, Nepali bankers have indicated that they prefer small-scale projects over large ones. “Domestic Financial Institutions prefer projects of 5-20 megawatt through consortium as financial sector of the country has limited financing capacity,” said Anil Shah, Chief Executive Officer of Mega Bank. “In the case of project size above 50 megawatt consortium of local banks along with interested foreign partners is essential.”

Bankers have preferred debt-equity ratio of 70 to 30 as the capital structure while financing the hydropower projects. “Ideal debt-equity will be 70 to 30 with minimum upfront equity of 25 to 30 percent in case of promoter with proven track record while it could be more for others,” said V S Bisht of  PTC Financial Services, India.

Technical Sessions

The Power Summit was concluded with 5 Technical Sessions, the first one being “Policy framework & current challenges in hydropower developmentChaired by Hari Ram Koirala, Secretary, Ministry of Energy. In this session, “Investment environment in energy sector in Nepal”was Presented by Radhesh Pant, Chairman, Board of Investment. Next presentation was made by Arjun Karki, J.S., Min of Energyon “Current policy framework and emerging trends”.  Third paper was presented by Shekhar Damle, Chief Executive, L&Ton “Challenges in project implementation”.  “Policy framework for institutional development”was the last presentation by Rajendra Kishore Kshatri, Joint Secretary, Nepal Law Commission.

Simiarly, Second Technical Session was on “Hydropower for socio-economic growth of Nepal” chaired by Hari Roka, CA Member. The First paper was on “Hydropower: Key to Nepal's development” presented by Gyanendra L. Pradhan, Chairman, Energy Committee, FNCCI. Likewise, Ashok Haldia, Director, PTC Finance Services illustrated on “Electricity as a tradable commodity: Prospects for Equitous Growth”.  The Third paper was served by Sher Singh Bhatt, Director, NEA on “Importance of cross-border market integration and opportunities thereof”.  Raghubir Sharma of IFC presented his paper on “International best practices on local benefits of hydropower projects”. Mr. Kulman Ghising, CEO, Chelmia HP made his paper focused on “Public private partnership for the development of Hydropower in Nepal” as the last presentation of this session.  

Technical session on the Second day on March 15 resumed with the issue onDomestic grid network & cross-border transmission linkages” and the session was chaired byMr. Gagan Thapa, CA Member. Ram Chandra Pandey, Director, NEA commenced the session with his presentation on “Status of Nepal's transmission lines and their expansion plans” followed by second presentation on “Status of cross-border transmission linkages” presented by Haziq Beg, Chief Operating Officer, IL & FS. Final Paper of this session was illustrated by Dr. Rajiv Mishra, PTC  on “Regional grid connectivity: A SAARC perspective”

Fourth Technical Sessionwas concerned with“Power pricing & trading Issues” and the session was chaired by Ganesh Subba, Electricity Tariff Fixation Commission. Rakesh Kumar, Vice President of PTC initiated the session with his presentation on “Emergent issues in power trading” and followed by next presentation from Sher Singh Bhatt, Director of NEA with his topic of discussion on “A comparison of power exchange & tariff bidding mechanism”.  Third paper of the fourth session was again from Rakesh Kumar, Vice President of PTC with a different topic on “Viability of power trade: Mix of domestic & international consumption” and final presentation was made by Sanjay Kumar from India on “Power market: A regional approach”

The fifth and last technical session was chaired byDr. Ram Sharan Mahat, Former Minister for Finance forHydropower funding: Equity and debt financing” in whichDr. Subarna Das Shrestha, President, IPPAN and Mr. V. S. Bisht, PTC Finance Services Limited presented their separate papers on “Investment opportunities in Nepal's Hydropower sector”Anand Kumar Jha made his presentation on “Project finance & local challenges” where as T.C.A. Ranganathan, CMD Exim Bank of India presented on “A banker's perspective on funding of hydropower in Nepal”.  Final presentation of the final session was on “Role of Insurance in Financing” and presented by R. Naidu, Himalayan General Insurance and Dr. Pranab Sen, Country Manager, National Insurance Co. Ltd.

All the technical session were followed by floor discussion, Q & A and remarks by respective Chairpersons.

Closing Session

The two-day Hydropower Summit 2012 concluded in the capital on Thurs­day with a general consensus on the need to expedite the development of hydropower sector in Nepal.

Speaking at the concluding session of the conference, Minister for Energy, Posta Bahadur Bogati said new electricity bill and bill on Nepal electricity regulation commission were presented before the parliament, and once the bills were passed they would direct the hydropower sector of the country.

“Similarly, preparation is underway to set up electricity transmission company, which would look into all problems on electricity transmission.” Minister Bogati said.

Minister Bogati further said the government had accelerated the works on settling disputes on export-oriented hydropower projects and the talks with India on trans-border electricity trade. He reiterated the govern­ment's commitment to facilitate the development of hydropower sector and said the government was seriously working to bring out the Power Development Agreement (PDA) template for export-oriented projects.

He Minister Bogati also urged the devel­opers of projects to be sensitive toward the issue of resettlement of the project­ affected locals.

Earlier, addressing a technical panel Former Finance Minister and CA Member Ram Sharan Mahatstressed on the need for depoliticization of hydropower sector and claimed that 5000 MW can be gen­erated within the next 10 years if we pri­0ritize the sector and remove hurdles.

Constituent Assembly member Gagan Thapa said the trend of reserving rivers in the name of hydropower production was not for the hydropower development.

Lawmaker Gagan Thapa also stressed on need for taking quick decisions and said Nepal can't get hydro­power by not building projects. He also opined that there was nothing wrong with India's concern over protecting its interests and urged Nepalis to see how Nepal's interest can be served.

Chairmanof the concluding session of the Summit and Indian Ambassador to Nepal Jayant Prasad said India has planned to import energy from Afghanistan, Pakistan, Iran and others and thus planning to link Nepal in this channel.

India was undergoing acute shortage of energy at present, he said, adding that once Nepal properly harness its water resources, it would be easy for India to import electricity from Nepal.

Indian Ambassador to Nepal Jayant Prasad also stressed on the need for taking decisions on the issue sooner than later. Addressing the concerns raised by Nepali developers over the tariff put by the Indian gov­ernment, Prasad compared the power demand of India with that of wheat and implied that the duties will eventually be waived.

Vice-President of Nepal-India Chamber of Commerce, ShyamLohia said this conference would help promote energy development in Nepal.

Chairman of Energy Committee of the FNCCI, Gyanendra Lal Pradhan said if south Asia engrosses on energy production, the region would be illuminated forever.

General Manager of Exim Bank, TCN Ranganathanexpressed commitment to help any Indian industrial institution investing in Nepal as per the Bank policy.

Exim Bank has been providing financial help to the development of hydropower projects in India.

The two-day summit also discussed on numbers of issues ranging from policy framework and current challenges in hydropower development to domestic grid network and cross-border transmission linkages.

During the summit, Bhutan was taken as an example for accelerating GDP and per capita income as well as overall economy by exporting electricity.

Similarly, speakers also stressed on cooperation among government, local bodies, consumers’ groups, and bank to complete the 400KV Mujaffapur-Dhalkebar transmission on time.

Earlier, the Power Summit 2008 was held in September and jointly hosted by IPPAN, NICCI and PTC of India.

Currently, Nepal is in need of 850MW electricity annually.