NEA signs PPA with Tanahu Hydropower

PPA rate fixed at Rs 12.4 per unit during dry season and Rs 6.08 per unit during summer months

KATHMANDU, June 30: Nepal Electricity Authority (NEA) has signed power purchase agreement (PPA) with Tanahu Hydropower Company Ltd (THCL) having capacity of 140 MW.

NEA Managing Director Kulman Ghising and Pradeep Kumar Thike, managing director of THCL, signed the agreement on behalf of their respective institutions in Kathmandu on Friday.

According to the agreement, the commercial operation date of the project has been set for April 12, 2024.

The storage-type project will generate 587.7 GWh of energy annually in the first 10 years of operation and 489.9 GWh from 11th year onward. It is situated on Seti River of Vyas Municipality near Damauli -- the district headquarters of Tanahun District.

Eight VDCs and Vyas Municipality of Tanahun district are directly affected by the project.

According to the agreement, the price of the electricity during the dry season (December to May) has been set at Rs 12.4 per unit, while NEA will pay the project Rs 6.08 per unit during wet season (June to November). The agreement will be valid till 30 years from the commercial operation date or until the validity of generation license, whichever is lower.

However, the agreement also includes a provision that allows increment in the energy purchase rate by 3 percent annually as escalation charge for eight years. With the adjustment of the escalation, the per unit price of the electricity from the project will be Rs 15.38 in dry season and Rs 7.54 in wet season after 97th months of the commercial operation.

If the supply of electricity falls below 35 percent of the annual energy supplied during dry season, NEA will pay the rate for the peaking run of river projects to Tanahu Hydropower. NEA has fixed energy purchase rate at Rs 10.55 per unit in dry season and Rs 4.8 per unit in wet season for peaking run of river projects.

According to officials of the THCL, NEA will purchase surplus energy of the project at 50 percent of the fixed rate.

Energy generated by the project will be connected to the national grid through 220-KV Damauli-Bharatpur transmission line.

According to the THCL, the company is preparing to start construction of main structures from November this year with a target of completing construction works within five years.

The project with an estimated cost of $505 million (including transmission line, rural electrification and interest payment of construction period) is being developed with the funding of the Asian Development Bank, JICA and European Investment Bank. ADB is investing $150 million in the project while JICA is chipping in $184 million. Similarly, EIB is providing financing support of $85 million while the government is investing $87 million in the project.

The company has already achieved financial closure to develop the project.