Private sector to construct power transmission line for first time

Kathmandu, Dec. 18: For the first time, the private sector has entered the construction of transmission lines for domestic power supply. 

The Tamor-Dhungesanghu 220 kV transmission line is to be built with investment from the private sector. 

An agreement has been signed to build a transmission line for power supply for the first time in a public-private partnership amidst a function on Tuesday.

The Memorandum of Understanding (MoU) was signed between the Rastriya Prasaran Grid Company Limited (RPGCL), Hydroelectricity Investment and Development Company (HIDCL) and five private sector power generating companies at the Ministry of Energy, Water Resources and Irrigation to construct the transmission line.

The grid company, HIDCL and five energy producing companies have formed a partnership to prepare a special purpose vehicle (SPV) for the construction of the transmission line.

Private sector energy producers, including Remit Hydro Limited, Simbuwa Remit Hydro Limited, Crystal Power Development Pvt. Ltd., Union Hydropower Limited and Nepal Hydro Venture Pvt. Ltd. have partnered to build the transmission line.

At the signing ceremony, chief executive officer at the RPGCL Dr. Netra Prasad Gyawali said that the RPGCL is planning to construct the Tamor-Dhungesanghu 220 kV transmission line through a public-private partnership (PPP) model, among the projects it has studied and is preparing to execute.

According to him, the total cost of the project, which is 32-kilometres-long and has a substation area of ​​220/132 kV, will be equal to Rs. 3.8 billion.

The 70 ropanis of land required for the construction of this transmission line have already been acquired. Gyawali said that all the pre-construction work has been completed.

Five private sector hydropower companies will invest their own capital in this project.

Currently, it has been proposed that 74 per cent share of the project will be owned by the power generation company and the remaining 26 per cent by the RPGCL.

Accordingly, Remit Hydro has been allotted 10 per cent, Simbuwa Remit Hydro 9 per cent, Crystal Power Development 42 per cent, Union Hydropower 8 per cent and Nepal Hydro Venture 5 per cent.

The main source of income of the project will be the wheeling charge booked by the respective power generating companies and the profit/loss will be borne by the shareholders after deducting debt repayment and operating expenses from the same income.

The HIDCL will invest in debt to build the project and a memorandum of understanding has been signed between the RPGCL and HIDCL for this.

This transmission line can carry about 700 MW of electricity produced from 10 hydropower projects in this area. 

Despite receiving production permits, the private sector has not yet received permission to construct transmission lines. 

“The government of Nepal has adopted an integrated policy of generating 13,000 MW of electricity by 2030 and 28,500 MW by 3035 and transmitting, distributing, consuming, and exporting it. Transmission line is one of the major parts of this and huge amount is required for it. The involvement of private sector is a must in construction of transmission line. So, this MoU will open door for private sector and fulfil the gap of fund required for transmission lines,” he said.

It is estimated that around Rs. 600 billion is required by 2030, Rs. 700 billion by 2035 and Rs. 901 billion by 2040.

On the occasion, Minister for Energy, Water Resources and Irrigation Deepak Khadka said that the MoU signed today has opened door for private sector to invest in the construction of transmission line and it will be a milestone in the field of hydropower sector.

It is challenging to raise the necessary capital from government sources for the construction of transmission lines. Currently, only the government is investing in transmission lines. 

“Private sector participation is an essential option. In the initial stage, it seems that it can be developed through public-private partnership and constructed and operated with full private investment as per the requirement,” he said. 

This is expected to accelerate the development of the transmission system by diversifying the construction of transmission lines. Managing director of the NEA Kul Man Ghising said that entry of private sector in the construction of transmission line in PPP model is a positive beginning and needs to adopted in other projects as well.

Stating that NEA has been investing huge amount in construction of transmission line so far, he said that the investment of NEA would be saved after the private sector started to invest in transmission line.

Chief Executive Officer of HIDCL Arjun Kumar Gautam said that new financing mechanism has been adopted in the construction of domestic transmission line and expressed the hope that it would be cost effective and easy to manage resources while constructing transmission lines under the PPP model. 

Representative from IPPs Krishan Prasad Acharya said that the participation of private sector in transmission line construction is a milestone in the field. It is believed that through the successful testing of the model, other transmission line projects in the country can also be implemented and a qualitative leap in transmission line development could be made in the country.