Government of Nepal Policy and Legal Aspects for promoting investment in Hydropower Development

Angira Acharya
Deputy Director General Department of Electricity Development Ministry of Energy November 2011

General Information

General Information Present Status Legal regime; Licensing procedure Hydropower Development Policy 2001 o Electricity Act o Nepal Electricity Regulatory Commission Act Prospective Projects P ti P j t

Nepal Energy Investors Forum 13-14 October, Kathmandu

General Information Country d t il C t details Area: Population: Literacy: Electricity Access (Grid or isolated): Urban population:

147181 sq km 26 million 60 % 48 % 15 %

Nepal Energy Investors Forum 13-14 October, Kathmandu

General Information
Energy Source

0.50% 0 50% 10.00% 87.50% 12.00%

2.00%

Traditional

Alternative

Fossil Fuel

Electricity

1.50% 3.80%1.20% 3.50%

Energy Use gy
90%

Residential Industrial Commercial Transport Others

General Information
Installed Capacity: 705.4 MW
Micro 1700 nos = 17 MW

In Grid 700.9 MW

Off Grid 4.5 MW

Hydro 647.5 MW

Thermal 53.4 MW

ROR 555 5 MW 555.5

Storage 92 MW

IPP 174.5 MW

NEA 381 MW

Present Status

Hydro Generation Capacity Under U d construction projects t ti j t Ready to go hydro projects (domestic) Ready to go hydro projects (Export) Others (at various stage of development)

650 MW 750 MW 1500 MW 4000 MW 10000 MW

Present Status
Year
Capacity d C it demand (MW) d Energy demand/day (dry) MWh

2009/10 10/11
893 12400 980 13640

11/12
1078 15004

12/13
1185 16504

Electricity Demand in Nepal

Present Demand Supply Scenario WET SEASON (June October) Availabilty Demand 692 MW (incl 92 MW storage) 500 MW (Off-Peak) 900 MW (Peak) ( ) 208 MW (Peak) --- 2 hours daily load shedding

Deficit

DRY SEASON (November May) Availabilty Demand 392 MW (incl 92 MW storage) 520 MW (Off-Peak) 980 MW (Peak) 588 MW (Peak) --- 14 hours daily load shedding

Deficit

National Water Plan

By 2027 Domestic demand to be met Per capita consumption Export Interim Plan By year 2016 to add Vision of government Within 10 Years 4000 MW 400 kWh Extensive

2500 MW

10000 MW

Licensing
License required for Survey, Generation, Transmission and Distribution for projects larger than 1 MW Survey License Generation T Transmission i i Distribution Construction/Operation Licenses Generation Transmission Distribution

Proponent submits application to DOED

S Survey Licens Application se

DOED asks the proponent to complete all required documents and resubmit within specific time (normally 35 days)

Does the proposed project overlap with other projects in the area?

YES

NO

NO

Are documents adequate & complete?

DOED rejects application and informs the proponent in writing

DOED requests revisions from the proponent

YES MoEn reviews and examines documents

MoEn sends the application back to DOED for comments

NO

Are documents acceptable?

YES

MoEn issues the Survey License to the proponent through DOED

Proponent submits application to DOED DOED approves application and forwards to MOWR with a draft license

DOED reviews documents

Ge eneratio Lice on ense Ap pplicatio on

NO

Are documents adequate & complete?

MOWR reviews and examines documents

YES DOED asks the proponent to complete all required documents and resubmit within 30 b it ithi days YES A Public Notice is published inviting comments from concerned parties within 35 days

Are A documents acceptable?

NO

MOWR sends the application back to DOED for comments

YES

Comments C received within 35 days?

NO

DOED addresses concerns of MOWR and requests revisions from the proponent

Upon consideration of comments, the terms and conditions that should be followed by the proponent shall be mentioned in the license

MoEn issues the Gen. License to the proponent through DOED

Proponent submits revised application to DOED revisions from the proponent

Policy for promoting investment in Hydropower

Licensing

Survey License within 30 days Generation license within 120 days Period of generation license up to 50 years at max ( 35 yrs for domestic and 30 years for export) Valid Survey license is required Public hearing before issuance of generation license PPA required before generation license 1 year given for financial closure i f fi i l l

Policy

Hydropower Development Policy, 2001

One of the objectives of the HDP, j , hydropower potential of Nepal in a meet the domestic demand and commodity and to attract foreign sector.

2001 is to develop p sustainable way to as an exportable investment in the

Policy Objectives of HDP 2001: Generate electricity at low cost Supply reliable and quality electricity at reasonable price Combine electrification with economic activities. Provision for rural electrification Generate hydro-electricity as an export commodity

Policy Projects envisaged to be developed through competitive solicitation titi li it ti BOOT model for private investment GoN may participate in multipurpose projects Provisions for environment protection GoN will facilitate land acquisition

Policy Maximum duration of generation license is 35 years for domestic supply and 30 years for export oriented projects y projects risks Additional five years for p j At the end of the license period, the project is to be handed to the state in good operating condition; free of cost Water rights guaranteed G Government land provided on lease tl d id d l No nationalization Foreign currency exchange facility and repatriation

Royalty

Capacity

Up to 15 years Annual capacity Royalty, per kW Energy Royalty, per kWh 1.75% 1 75% 1.85% 2.00% -

After 15 years* Annual capacity Royalty, per kW Rs. Rs 1000/Rs. 1200/Rs. 1500/Rs. 3000/Energy Royalty, per kWh 10% 10% 10% -

1 2 3 4 5

Up to 1 MW From 1 MW to 10 MW From 10 MW to 100 MW Above 100 MW For captive use

Rs. Rs 100/Rs. 150/Rs 200/Rs. 1500/-

Capacity royalty will be escalated 5 % per annum

Environmental Issues Environmental Impact Assessment Required for: Projects more than 50 MW capacity Proposed within conservation reserved national park conservation, reserved, area and its buffer zone and heritage area Requires more than 5 hectares of forest land land, Inter-basin transfer Requires displacement of more than 100 people Public consultation required - During scoping document - During completion of draft report - During approval of EIA Report by MoEnv (Environmental i (E i t l issues) ) - Before issuance of Generation license (General issue)

Acts New Electricity Act; (presently under consideration of the parliament) Key Features:
Time bound and transparent license procedure p p Clear financial incentives Exemption of corporate tax for 7 years and 50 % for next 3 years ( Presently;10+5 years) Exemption of VAT & 1 % Customs on machines, equipment (1 Million NRs/MW exempted for Construction materials) Clear royalty provisions High level "one window" service committee (and task force) Guarantee of water rights g

Acts

Rights and privileges of the local people Provision of maximum 10 % equity share for local people Electrification in the area of km radius of headworks and powerhouse Free 20 units of electricity powerhouse. 52 % of the royalty goes to the local government

Acts

Nepal Electricity Regulatory Commission p y g y Key Features: Will be an independent commission Will protect the consumers (and other stakeholders) interest i t t Will monitor, regulate the sector Will approve the tariff at various stages of transaction

Acts

Nepal Electricity Regulatory Commission p y g y Key Features: Will be an independent commission Will protect the consumers (and other stakeholders) interest i t t Will monitor, regulate the sector Will approve the tariff at various stages of transaction

Project Development Agreement (PDA)

Key Features : Generation License will be for a period of 35 years for domestic project and 30 years for export oriented A maximum 10 % equity share to the local people Electrification and free supply of 20 kWh per month to households within a periphery of 500 m from the project area Royalty rates as per Hydro P R lt t H d Power D Development P li l t Policy Free energy to GON Project Compensation Committee to cover the political non political political, non-political and other risks (extension of license period up to 5 years) Arbitration as per UNCITRAL Rules Non refundable fee of 1500 US $/MW Performance Guarantee of 7000 US $/MW (up to COD)

Projects applied for Project Development Agreement (PDA)

S No 1 2 3 4 5 6 7 8 Project Upper Karnali Likhu 4 Balephi Upper Marsyangdi 2 Tamakoshi 3 Arun 3 Lower Arun Upper Marsyangdi A Capacity (MW) 900 120 50 600 880 900 400 50 Developer GMR, GMR India Green Ventures Green Ventures Himtal Hydropower S N power Holding SJVNL, SJVNL India Brasspower Sagarmatha-sinohydro

PRESENT STATUS OF LICENSING PROCEDURES

As new Acts has not been passed by legislature, p y g GON has introduced Internal Working Procedure (2011) Up to 10 MW projects, procedure as per existing rules and regulations with provisions of checking financial capability fi i l bilit j g y For projects higher than 10 MW capacity, GON will solicit the prospective developers

Prospective projects The following projects are some of the available projects for development: 1. West Seti Reservoir Project (750 MW) 2. Budhigandaki Reservoir Project ( g j (600 MW) ) 3. Nalsyaugad Reservoir Project (400 MW) 4. Tamor Reservoir Project (400 MW) 5. 5 Dudhkoshi Reservoir Project (300MW) 6. Aandhi Khola Reservoir Project (170 MW) 7. Upper Arun RoR Project (335 MW) 8. Simbuwa R R P j 8 Si b RoR Project ( 80 MW) 9. Dudhkoshi RoR Project (40 MW) 10. Budhiganga RoR project ( MW) g g p j (20 )

Licensing
Information on licenses are available at; www.moen.gov.np (Ministry of Energy) www.doed.gov.np (Dept. of Electricity Development) g p( p y p ) Information on the sector is available at; www.nea.org.np (Nepal Electricity Authority)

Nepal Energy Investors Forum 13-14 October, Kathmandu