Laxmi Capital News
More RoR plants to get 'take or pay' PPAs

A recent decisionof the Ministry of Energy has paved the way for hydropower producers,particularly those developing Run of River (RoR) type projects, to sign powerpurchase agreement with Neal Electricity Authority (NEA).

The Ministry ofEnergy couple of weeks back directed the power utility to sign more PPAs withRoR projects on take or pay basis after the seven-year energy development planrevised the target of generating 17,000 MW in seven years, up from 10,000 MW in10 years set earlier in 2016.

Take or pay meansthat NEA must pay power developers regardless of whether it needs energy ornot. The decision is different from take and pay PPAs that NEA signed withseveral hydropower plants. The agreement means NEA can purchase electricity forproject only when it needs and pay for the developer, accordingly. It hadseveral projects unfeasible for bank loans.  

The decision hasended uncertainty among hydropower developers regarding PPA. The developers cannow enter the generation phase after signing PPA with the power utility.
The decision allowed the NEA to raise PPA cap for RoR projects to 5,100 MW fromexisting 3,000 MW. National Energy Crisis Reduction and Electricity DevelopmentPlan unveiled in February, 2016, required NEA to put PPA cap for RoR projectsat 30 percent to ensure balanced energy mix and discourage RoR plants whichoperate at low capacity during winter months when energy demand hits peak.

Different RoRprojects having a combined capacity of 2,000 MW are waiting for the response ofNEA on their PPA proposals. Different projects having combined capacity of5,000 MW are awaiting nod from the NEA for PPA.

The IndependentPower Producers' Association, Nepal (IPPAN) has welcomed the decision. Issuinga statement, IPPAN President Shailendra Guragain said that many developers,whose PPA proposals were pending after PPA signed by NEA reached the 3,000 MWcap, will feel relieved.

NEA signsPPA for Upper Trishuli-1

Meanwhile, NEA has signed power purchase agreement with Nepal Water & EnergyDevelopment Co Pvt Ltd on Sunday to purchase electricity generated by UpperTrishuli-1 hydropower project (216 MW). 

NWEDC is a jointventure company promoted by South Korean and Nepali investors.
NEA Managing Director, Kulman Ghising, and NWEDC CEO, Bo Seuk Yi, signed theagreement on behalf of their respective organizations. 
According to the agreement, NEA will pay NWEDC in US dollar for 10 years oruntil the company repays its foreign loan, whichever comes earlier.

The plant locatedin Rasuwa on Trishuli River will generate 456.4 GWh of energy annually. 

NEA will pay Rs4.80 per unit for the energy generated during wet months, while PPA rate forthe dry months has been set at Rs 8.40 per unit. 

NEA also said thatNWEDC, together with NEA and the government, will set up a hedge fund forsharing currency exchange risks. Nepal Rastra Bank will prepare guidelines forthe fund.

Energy SecretaryAnup Kumar Upadhyaya, South Korean Ambassador to Nepal, Park Yong Sik, and IFCcountry manager Mohammad Rehan Rashid were present in the PPA signing programheld at NEA. IFC will arrange loan debt for the project. 

The project willenter construction phase in April, setting a target of starting power generationwithin five years, according to officials of NWEDC.

Source: My Republica,29th January 2018
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