August 14: At a time when the private sector’s investment in the hydropower sector as well as production is increasing, the government has prepared a report that recommends giving priority to government funded projects for power purchase and sale agreement (PPA).

The report has recommended giving priority to projects of Nepal Electricity Authority (NEA) and its subsidiaries and government-owned companies for PPA.

The 'Report on Policy Arrangements Regarding Power Purchase and Sale Agreement-2080' prepared a committee headed by Joint Secretary of the Ministry of Energy, Water Resources and Irrigation, Sandeep Kumar Dev, made such a recommendation.

After publishing the report of the committee formed by the government, the Independent Power Producers Association of Nepal (IPPAN) expressed discontent with the recommendation.

Ganesh Karki, president of IPPAN, said that it is not fair that the private sector projects that have already invested millions of rupees are not prioritized for the PPA.

IPPAN held a press conference in Kathmandu on Sunday to publicize its views on the report. On the occasion, Karki said, "PPA should be done on a first-come, first-served basis."

The committee has made 16 recommendations including PPA. Similarly, IPPAN said that that the committee’s recommendation to cancel the survey license and PPA of the projects that have failed to secure financial resources within a certain period is not justifiable in the current situation. IPPAN demanded the government grant a special extension period of one year for projects that could not achieve financial closure due to Covid-19 and lack of liquidity.

IPPAN has suggested that the period of financial management should be fixed for 3 years for projects up to 100 MW and for 4 years for 100 to 500 MW projects and 5 years for projects above 500 MW.

In the report of the committee, it is recommended to manage the financial management within 2 years from the date of completion of PPA for projects up to 100 MW and within 3 years from the date of completion of PPA for projects above 100 MW. It has been mentioned that if there is no financial management during this period, regardless of what is written in the production license and PPA, the authority may cancel the PPA and confiscate the bank guarantee of the project.

Meanwhile, Mohan Kumar Dangi, senior vice president of IPPAN, said that the provision of allowing the return on equity (ROE) of 17 percent and more for large projects has come as per the demand of the private sector.

The committee formed by the government has given priority to the government's projects in the PPA, but has recommended to encourage small investors from the private sector.

It has been mentioned that ROR and PROR hydropower projects with a connected capacity of up to 10 megawatts will be given priority over larger projects.

Nepal as set a target to produce 15,000 megawatts of electricity by 2028. Nepal has already signed an agreement with India to achieve this goal and to export up to 10,000 megawatts of electricity from Nepal to India.