Hydro Fund to empower sleeping hydropower promoters

Hydro Fund to empower sleeping hydropower promoters
ekantipur, 19-Nov-08
Bikash Thapa

There’s really good news for hydropower promoters who hold survey licenses for power projects, but have not carried out even the feasibility study for their projects for a long time due to the lack of financial resources: a fund is going to be set up, with the sole aim of helping them in the power production process—from carrying out the feasibility study to actually constructing the projects.

With the technical support from the South Asia Regional Initiative for Energy (SARI/Energy) under USAID, the ‘Hydro-Fund’ will start operating from next week. The fund, first of its kind in the country, hopes to support the construction of some 40 power projects within the next two years.

The fund is being set up in the leadership of Clean Energy Development Bank Limited (CEDBL)—established two years ago to invest in hydroelectricity and renewable energy—collecting capital from various Nepali investors.

The fund that will have over Rs 300 million will invest in the projects producing up to 50 Megawatt (MW) hydroelectricity, according to Dr Janak Lal Karmacharya, the chief of the Hydro-Unit of CEDBL. However, the fund can also extend its support to compelling projects that could generate more than 50MW.

According to the Department of Electricity Development (DoED), survey licenses for projects expected to generate 6600MW electricity have already been issued. However, only 550MW hydroelectricity has been generated as yet. The country has been facing the current load-shedding due to a shortage of 60 to 80MW electricity every year.

There are 133 projects that have obtained licenses for less than 1MW electricity production. Similarly, DoED has issued licenses for 266 projects, each expected to produce more than 1MW.

Dr Karmacharya pointed out the dearth of equity for the current slackness in the country’s hydropower sector. “We will invest in the projects that get selected, from carrying out their feasibility studies to the construction process,” he said.

According to Dr Karmacharya, the Hydro-Fund plans to start the projects that are economically and technically feasible, have physical infrastructure for the transmission of the electricity generated and have access roads. “Many promoters are shying away from production due to the lack of funds,” he said.

Dr Karmacharya, a former managing director of Nepal Electricity Authority, informed that it costs about Rs 3 million just for the feasibility study of a 5 MW project. The greater the scope of the project, the more is the cost of its feasibility study.

“After the feasibility study, viable projects will be funded by the bank through the Hydro Fund to support their loan and equity portion,” said Manoj Goyal, the chief executive officer of CEBDL. According to him, the bank will avail up to 70 per cent loan for a project.

The Netherlands Development Finance Company (FMO) has 40 per cent share in the CEDBL.

According to Goyal, the capital required will be managed from the Mekong Brahmaputra Clean Development Fund (MBCDF). The CEDBL and the MBCDF have agreed to invest up to 100 million USD in Nepal’s energy sector. The CEBDL has provisioned two funds targeting the hydroelectricity projects that have not started yet due to dearth of financial resources.

Dr Karmacharya informed that the license holders can become shareholder if they desire after the completion of the project. “The ones who invest can get share of the project if they want,” said he.

Noting that the lack of funds for carrying out the feasibility study bothers promoters the most, Krishna Prasad Bhandari, member of Small Hydropower Development Association, welcomed the establishment of the Hydro-Fund, which he said will be instrumental in finding a solution to the capital crunch.