20th February 2018
Mollah Amzad Hossain; Back From Katmandu, Nepal

   Nepal wants to generate 40,000 MW of electricity, mostly hydropower, in next 10 years as the country sought local and foreign investment at an international conference on January 27-29 in Kathmandu.

 

The country has so far been able to develop just around 1,000 MW of the electricity in more than a century despite having immense potential of generating 83,000 MW of electricity from its water resources.

 

Development of hydropower in Nepal is expected to benefit the neighboring countries as well and eventually contribute to economic development of the region.

 

Addressing the inaugural ceremony of the Nepal Power Investment Summit 2018, Nepali President Bidya Devi Bhandari said that hydropower development in the country is crucial for meeting Nepal's internal demand and exporting the surplus energy to the neighboring countries.

 

"In Nepal and South Asia where rapid development is expected, demand for electricity is soaring," she said, urging domestic and foreign investors to inject their capital in hydropower to cash in on the immense opportunity provided by soaring demands of electricity in the South Asian region.

 

The three-day summit organized by Energy Development Council (EDC), a body representing Nepal's energy sector, has brought together Nepali policy makers, domestic power developers, multinational companies related to power sectors, international financiers and experts to discuss on investment opportunities in Nepal's power sector and find financiers for the "ready to go" projects.

 

Around 100 participants from 30 international companies and over 400 participants from Nepal including policymakers and the private sector attended the summit.

 

The event was featured by high-level delegates from SAARC and training programs by renowned international energy and financial organizations. Similarly, EDC also organized an energy mart during the summit to promote the country’s energy sector. Along with hydropower, the event also promoted wind energy and solar energy in the country and showcased latest energy-related technologies.

 

President Bhandari assured that the government was committed to creating a favorable atmosphere for investment by taking due consideration of the investors’ interest and real needs.

 

“We need capital, technology, market feasibility and development of cross-border transmission line for implementation of large scale projects and the government will accord top priority to attract foreign investment in hydropower,” she reiterated.

 

She said rapid development of renewable energy sources also requires due attention in the context of negative consequences for environment posed by impact of climate change and excessive use of fossil fuels.

 

The summit highlighted the Himalayan nation's topographical advantage in sectors like hydroelectricity. Sandwiched between India and the Tibet autonomous region of Southwest China, the Himalayan country's unique topographical characteristics give it the potential to generate green energy such as hydropower. A report by the International Finance Corporation has estimated there are climate investment opportunities in Nepal that will be worth U.S. $46 billion by 2030 in key sectors including renewable energy.

 

Sujit Acharya, chairperson of Nepal's Energy Development Council (EDC), said those investment opportunities could be even bigger — as much as U.S. $80 billion in the next 10 years.

 

"Nepal's current situation is that we have a very low installed capacity of about 1,100 MW of electricity, with almost 400 MW of this imported," he said.

 

"In contrast, just our hydropower potential is 300,000 MW, which is the largest in South Asia. Therefore, we have not even realized 1 percent of our entire hydropower potential."

 

Mr Acharya said Nepal's power sector offers one of the highest returns on investment in Asia — more than 25 percent return on investment over the holding period and four times the value of the investment on exit.

 

"The various advantages such as a U.S. dollar-based power purchase agreement along with an annual increment in the power purchase rate during the initial nine years, complete tax exemption for the first decade along with a project development agreement that protects investors from changes in law, ensures the above results," he said.

 

Currently, there are more than 50 foreign investors in Nepal's power sector and Mr Acharya expected the number to grow rapidly in the coming years. The top investing countries are China, India and South Korea.

 

Mr Acharya said investors should pay attention to power-related projects other than in the hydropower sector. "Chinese companies should begin to establish assembling plants for electric machinery and equipment in Nepal if (China) wants to be the major player in the South Asian market," he said.

 

"It is the right time for Chinese financial institutions and Chinese EPC (engineering procurement construction) contractors to come to Nepal and become the major partner in the 40,000 MW endeavor of Nepal," he said.

 

Indian Ambassador to Nepal Manjeev Singh Puri said that India was always supportive to Nepal’s energy sector’s development, adding that both the countries were jointly working in this sector.

 

Bangladesh Ambassador to Nepal Mashfee Binte Shams expressed the country’s interest to invest around US$ 1.0 billion in Nepal’s hydropower projects.

 

In his keynote address, he stressed the need for expeditiously moving forward on all hydropower projects in Nepal. He said that Indian economy to grow five-folds by the year 2040 and this will require great energy inputs. Ambassador Puri said that world is closely watching Indian investment in hydro power in Nepal. He said that this will be litmus test for flow of further investment in hydro power sector in Nepal.

 

But Nepal's per capita energy consumption is the lowest in South Asia at only 191 units per year. This compares to 4,000 units in China and 1,000 units in India.

 

Data from the Nepal Electricity Authority show that only 65 percent of the people have access to grid electricity. "Around 60 percent of the population is using electricity mostly only for lighting purposes," said Nepal's ambassador to China, Leela Mani Paudyal.

 

He said Nepal will have a stable government after the recent election, boosting investor confidence. He said the government will continue to adopt friendly foreign investment policies and make efforts to meet investors' demands.

 

During the thematic discussions at the summit, experts and insiders of Nepal's power sector said that Nepal's policies with regard to hydropower development have been friendlier to international investors, but the Nepali government agencies have been slow to implement them.

 

They said the government's policy of purchasing power in U.S. dollar term, flexibility in removing land ceiling for big hydro projects and availability of technical human resources are notable developments required for attracting foreign investment.

 

Prateek Man Singh Pradhan, one of the vice presidents of Butwal Power Company, said the government's policy of purchasing power in the U.S. dollar was one of the very encouraging policy reforms initiated in the power sector.

 

N. L. Sharma, chairman of India's state-owned Satluj Jal Vidyut Nigam named hassles during the land accusation and clearance of forest and environment as some of the factors distracting FDI in Nepal's energy sector.

 

Joseph Hoess, director of Dragon Capital, Vietnam, said hassles that any foreign investors have to go through while doing ground works could discourage foreign investment in Nepal.

 

"We are the private sector who looks maximized return within short period of time, but here in Nepal we have to invest more than five years doing basic things, getting approvals and clearances," he said.

 

Addressing the closing ceremony of the summit, CPN (UML) Chairman and former Prime Minister K.P. Sharma stressed the need for creating environment for energy trade under the spirit of SAFTA and create energy infrastructure to facilitate the power trade.

 

“This is also necessary in the context of seasonality of power production and consumption, energy mix, cost effectiveness in transmission and distribution, substitution of energy demand by clean and renewable energy than fossil fuel based ones,” he said.

 

He expressed the hope that the target of generating power, particularly hydropower, would be achieved as the country is enjoying a political stability now, making the investors interested.


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