The PPA envisages forfeiting bank guarantee should IPPs fail to generate electricity within the specified timeframe.[break]
IPPs claim that such a provision will water down the investment climate in hydropower sector. They even do not hesitate to say that NEA has pulled wool over the investors´ eyes by making them sign the PPA with such provision.
As per the provision, IPPs must provide a bank guarantee of Rs 0.6 million per megawatt of installed capacity of the project. If developers fail to generate electricity within the Required Commercial Operation Date (RCOD) - the specified time - NEA will forfeit the bond amount.
“NEA did not divulge the bond amount at the time of signing the PPA,” said Pradeep Gangol, executive director of Independent Power Producers´ Association, Nepal. “When we inquired about the provision, NEA officials dismissed it saying it will not come into effect.”
Besides the bond, if power developers fail to generate electricity within the specified period, NEA makes them pay a fine of Rs 1 million per megawatt of installed capacity of the project for one-year extension.
“This dual provision of imposing fines will hit the investors hard,” said Gangol.
According to investors, dillydallying of NEA officials to expedite documentation-related works amid fluid political situation of the country and lax security situation has been rendering the efforts to complete the hydro projects futile on stipulated time. Gangol said time-bound project completion is impossible in the light of current situation.
He further said that they had put forth their demand to scrap the provision with the officials at the Ministry of Energy. The latter had made a decision to seek bank guarantee as a performance bond on February 15 this year.
“The provision will not discourage genuine investors. The government has requested the concerned power developers who have been ready for PPA to voluntarily specify the RCOD,” said a ministry official, requesting anonymity.
It is appropriate to clear the field for genuine investors and impose fine on the defaulters, added the official.
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