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DAM-L Nepal Hydropower scene: Poor Private investment (fwd)

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Subject: Nepal Hydropower scene: Poor Private investment

Kathmandu Post, November 30, 2000

  Private investment in hydropower poor

  Post Report

  KATHMANDU, Nov 29 - Since the country adopted a liberal economic
policy, scores of private
  investors expressed their desire to develop hydro electricity projects
in Nepal.

  Yet the investment in hydel projects make up only a small portion of
such investments and that is an
  issue of concern, said experts today during an interaction program
organized by Nepal Hydropower
  Association here.

  "In the last five years, 80-85 per cent of the capital flow has been
in energy and telecommunications
  sectors, however, not much of it has gone to the hydropower projects
and that is a concern and a
  challenge," said Rameshananda Vaidya, member of the National Planning
Commission and an expert
  on water resources.

  In recent years, the government has received several inquiries and
applications from local companies
  to multinational power giant. Yet only few have of these have actually
materialized.

  This week the 60-megawatt Khimti I hydroelectricity project, which was
the first privately developed
  hydel project, was formally opened by His Majesty King Birendra.

  The project, the US$ 140 million a run-of-the-river type project,
began to contribute to the national grid
  in March and by July 11, it began commercial generation with annual
generation of an estimated 350
  kilowatt hours or units.

  However, this is just one of the few success stories. Other companies
like U.S. power giant Enron
  Renewable Corp which has made several attempts to jump into developing
the 10,800 megawatts
  Karnali-Chisapani project have faced bitter experiences mainly due to
the political instability and the
  slow decision making process.

  Yet there are at least another half dozen investors who are in the
process of applying for permission to
  develop hydel projects in Nepal.

  To accommodate and attract this new breed of investors a new Water
Resources Policy 2000 drafted
  by the Ministry of Water Resources is being reviewed by the Finance
Committee of the Cabinet.

  This policy, according to officials, mainly focuses on attracting the
investors to invest and develop
  such projects.

  Though recent study has shown that Nepal has the potentiality to
produce 83,000 megawatts of power
  out of which 42,000 megawatts is feasible, at present only about 300
megawatts is generated even
  when there is high demand for power during winter creating a huge
deficit in power supply.

  Worse, only 15 per cent to the total population have access to
electricity and mainly in the urban
  areas while the majority of the population that live in rural areas do
not have access to electricity.

  "Even though hydro power in Nepal has a tremendous role for
development of the country only one per
  cent of the total energy is met by hydropower," Vaidya said. "But it
indicates the potential of energy
  and there is room for expansion on the use of energy."

  Vaidya also said that since water diverted to projects leads to
decrease in water for irrigation and
  other purposes, there is a need to develop a framework to address
water rights issues.

  During the seminar on experiences from recent hydropower projects in
Nepal, experts reviewed the
  projects such as Khimti I, Kaligandaki A, Modi Khola, Puwa, Indrawati
and Chilime hydropower
  projects.

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