A Welcome Powerful Move

The government’s recent move to involve the private sector in constructing transmission lines is a welcome one. It presents a very crucial juncture in the country's energy landscape. For the first time, construction related to electricity transmission infrastructure will be undertaken with the participation of private companies on a public-private partnership (PPP) model. It is a move which promises to overcome pressing energy needs and ambitious hydropower goals of the country. This strategic shift is more than a pragmatic solution; it could be a game-changer for Nepal's energy sector, unlocking new opportunities for faster project execution, improved technological innovation, and better capital management.

Indeed, the signing of an agreement between the Ministry of Energy, Water Resources, and Irrigation, National Transmission Grid Company Limited (NTGCL), and six private sector companies for the construction of a transmission line signifies a considerable departure from the past when only the state-owned Nepal Electricity Authority (NEA) was assigned the task of building transmission lines solely. The new PPP arrangement shall, from now on, finance, besides developing much-needed transmission infrastructure with active private sector participation, so as to help Nepal achieve its goals both in electricity generation and exports. In this regard, the model project on the construction of the 32-kilometer Tamor-Dhungesanghu 220 kV transmission line reflects the commitment of the Government of Nepal to modernize the energy sector at an accelerated level.

The transmission line would include a 220/132 kV substation with an estimated cost of about Rs 3.8 billion. That pre-construction work is already complete and it is now in the final stage for the required transmission permits testifies to readiness for taking off on the ground with work by the private sector. It's a critical move considering Nepal's energy ambition surpassing domestic demand requirements.

Nepal is going to need huge transmission infrastructure, keeping in mind the commitment of the government to generate 13,000 MW by 2030 and 28,500 MW by 2035. With such power generation goals, Nepal needs to pace up in moving that quantity of electricity not only across the country but across borders and that too efficiently. The agreement with the private companies fully acknowledges that these ambitious targets cannot be achieved solely by the government through the NEA itself and private sector involvement in this development process is a must.

Besides helping to accelerate construction, private sector involvement in the development process is expected to bring new efficiencies, technologies, and management practices that will be vital in transforming Nepal's power transmission landscape. In that process, the government is also sharing both financial burdens and technical know-how with the private sector to use their strengths towards fulfilling the ever-growing demand of the energy market. As noted by the Minister for Energy, Water Resources, and Irrigation, Deepak Khadka, this collaboration falls within the larger vision of partnership with the private sector in respect of the overall development of the country, which, per se, includes no exemption on the energy sector. Similarly, the PPP model at the Tamor-Dhungesanghu Transmission Line is important since it follows a growing global trend where participation by private capital and expertise has already become vital in any big-ticket public infrastructure projects.

In the proposed model, hydropower generating companies shall hold 74 percent of the shares while the remaining 26 percent shall be held by grid companies. It shall operate as an independent corporate entity having its own financial and operational management. This type of structure will ensure that the project is viable financially and commercially, considering the transmission fee is a significant source of revenue. It gives the government a clear incentive for efficiency in the management of the project and accountability by giving the private sector a direct stake in the success of the project.

Probably the most exciting thing about this project is that it offers long-term strategic and financial benefits. With the estimated total cost for constructing transmission infrastructure reaching Rs 6 trillion by 2030, Rs 7 trillion by 2035, and Rs 9.1 trillion by 2040, the government is on the right track, exploring new avenues for capital management. This will also distribute the sharing of financial burdens off the state to make funds available for other vital development projects. Besides, when it is a question of constructing transmission lines by private companies, it should be more competitive and transparent, reducing delays and cost overruns that have plagued so many public-sector projects in the past.

Also, the initiative aligns with Nepal's broader goal of becoming a regional power exporter. With neighboring countries like India and Bangladesh already agreeing to import Nepal’s hydropower, the need for a sound transmission network cannot be neglected. Increasing the capacity of transmission and renewing infrastructures will keep Nepal in a better position to exploit the emerging demand for clean, renewable energy in the region. This will not only bring in much-needed foreign exchange with the ability to export electricity, but also enhance Nepal's geopolitical and economic standing in South Asia.