Agreement signed between Ministry of Energy and private sector

For the first time, the private sector has entered the construction of electricity transmission lines in Nepal. The government is going to build an electricity transmission line through the public-private partnership (PPP) model. While only the Nepal Electricity Authority has been building transmission lines, private sector companies are also going to build transmission lines after the government made policy arrangements to build transmission lines in collaboration with the private sector.

An agreement was signed between the Ministry of Energy, Water Resources and Irrigation and the private sector on Tuesday to build the transmission line. The agreement was signed between the National Transmission Grid Company Limited, Hydroelectricity Investment and Development Company (HIDCL) and six private sector promoter companies at the Ministry of Energy, Water Resources and Irrigation. The private sector promoter companies which will share the investment are Simbuwa Remit Hydro Limited, Remit Hydro Limited, Crystal Power Development Pvt Ltd, Union Hydropower Limited and Nepal Hydro Venture Pvt Ltd.

The Tamor-Dhungesanghu 220 kV transmission line is going to be built through a public-private partnership under the 'build-operate-transfer (BOT)' model. The total cost of the project, which is 32 km long and has a 220/132 kV substation, is around Rs 3.8 billion. All pre-construction work has been completed and the project is in the final stages of obtaining the transmission permit. Currently, about 70 ropanis of land has been acquired and other expenses will be capitalized in the company to be established under the PPP model.

The government, which has set a target of generating 28,500 megawatts of electricity by 2035, has brought in the private sector as it will be difficult to achieve the target if the NEA alone builds the transmission lines. Minister for Energy, Water Resources and Irrigation, Deepak Khadka, said that the private sector has been brought in to build the transmission line as part of the campaign to partner with the private sector in the development of the country. “For the first time in Nepal, the private sector is also going to build a transmission line,” Minister Khadka said, “This will help meet the government’s target.” He further said that the private sector is expected to support the government in meeting the government’s target. Since the government needs to explore and implement other options for capital management, it has adopted a policy of developing and constructing projects through public-private partnerships as per the need.

The government has a plan to accelerate the development of the transmission system by diversifying the construction of transmission lines. Minister Khadka said that the participation of the private sector will help introduce new technology and management systems. The ministry has stated that electricity generating companies will participate in the construction of transmission lines through equity investment. According to the BOT model, hydropower generating companies will have 74 percent shares and 26 percent shares will be held by grid companies. The main source of income of the project will be the transmission fee booked by the relevant power generating companies. The memorandum of understanding states that the shareholders will bear the profit/loss after deducting debt repayment and operating expenses from the same income.

The project will be operated under its own independent corporate identity. Despite receiving production permission, the private sector has not yet received permission to construct transmission lines. The Government of Nepal has adopted an integrated policy of transmitting, distributing, consuming and exporting electricity by generating 13,000 MW in 2030 and 28,500 MW in 3035. Nepal will need 6 trillion rupees by 2030, 7 trillion rupees by 2035 and 9.1 trillion rupees by 2040 for the construction of transmission lines.