Promoted by Nepal Electricity Authority with the participation of local community, Chilime Hydro Power Company has established itself as a credible and reliable power company in Nepal.  KUL MAN GHISING, Executive Director of Chilime Hydropower Company Ltd, spoke to BIKAS THAPA on various issues. Excerpts:

What is the state of projects implemented by Chilime?

Chilime power plant has been in operation since 2003. We decided to promote four power projects last year. For the construction of the new projects, four companies, including Sanjen and Upper Sanjen, Rashuwa Gadhi and Middle Bhote Kosi, have already been established. Financial matters of all these projects have already been settled and Power Purchasing Agreement (PPA) has been signed.

What is the state of Sanjen?

Construction of 16-kilometer access road for 42 MW Sanjen project is at the final stage. Camp facilities are under construction and land acquisition has been completed. It has obtained the generation license. The tender for the main civil work is also at the last stage and everything will be finalized within a month. By December 2015, the project will be completed.  Similarly, the construction of access road has already been completed for 14.8 MW upper Sanjen. As the company has secured generation license, the company is now at the contractor mobilization stage. From this dry session, the work will begin. The construction of both the projects will start at the same time and complete by December 2015. Except Interest during Construction (IDC), the total cost of both the projects is 7.24 billion rupees.

What about 111 MW Rasuwa Gadhi Project?

The financing matters have been completed, along with the generation license. Out of 250 Test Audit Tunnel, 150 meters have been completed. This project is in between the high-way to Kerung of Tibetan Autonomous Region of China and Nepal. We don't need any access road to this project. This is Engineering Procurement (EPC) project. It includes two packages Civil and Hydro Mechanical and Electro Mechanical. The prequalification for Civil Work is in the final stage and 22 contractors have applied for the work. The contract agreement will be signed within six months. The mobilization will begin from this fiscal year. The total cost of the project is 13.68 billion rupees, except Interest during Construction. The construction of camp facilities has already begun. It will generate electricity by December 2016.

After a long dispute, what is the state of 102 MW Middle Bhote Kosi?

Due to the dispute on the issue related to rafting, it has taken a lot of time for Environment Impact Assessment (EIA). Now EIA is at the final stage and it is now at the Ministry of Science and Technology and Environment. Following approval, we will go for the generation license. It took extra four-five months due to rafting. Despite delay in the early stage, the project will be completed as per the schedule. It will not affect the date for generation. Some even took the case of the construction of 250m Meter Test Audit Tunnel to Supreme Court and the Court issued the decision in our favor. Mobilization of contractors is at the last stage. The total cost of the project is 12.28 billion rupees. This is also an EPC.  It will generate power by December 2016.

What will be the total generation capacity after completion of these projects?

After completion of the four projects, our generation capacity will be 270 MW in rainy season and 90 MW in winter. This is low for the project based on Q 40 design.

What is the project development model?

Chilime has been following a unique model of partnership with local community and general public. We have been following two P Model: People and public partnership.

Upper Bhote Kosi is under Public, Private, People and Community partnership. Our focus is people. There is no private sector in Rasuwagadhi and Sanjen.  For instance, Chilime's model is 50 percent loan and 50 percent equity.

What model are you following in Rasuwagadhi?

In Rasuwagadhi Hydropower Company, there is 51 percent share for promoters, 33 percent owned by Chilime and 18 percent by Nepal Electricity Authority. Under 49 percent public share, 15 percent is for general public, 10 percent for project affected local people, 19.5 percent for contributors of EPF, 1 percent for employees of Employee's Provident Fund and 3.5 percent for employees of promoters.

What is the share equity structure in Sanjen Hydropower Company?

 In both Sanjen, Chilime Hydropower Company has 38 percent, Nepal Electricity Authority has 10, and Rasuwa DDC and 18 VDCs 3 percent. Out of 49 percent public share, 10 percent is for affected local people, 15 percent general public, 19.5 percent contributors of Employee Provident Fund, 1 percent for employees of Employees Provident Fund and 3.5 percent for employees of promoters.

What about Middle Bhote Kosi?

In Middle Bhote Kosi, Chilime Hydro Power has 38 percent, NEA 10, three private promoter of Sindhupalchowk 3, 15 percent general public, project affected local people 10 percent, employees of EPF 1, and 3.50 percent employees of promoters and 19.5 percent depositors of Employees Provident Fund.

Why is Chilime in a hurry in project construction?

Chilime failed to bring any new projects after it started generation. We have lost a long period without going for any new projects. The company spent its time making lip service for Sanjen. We have 3 billion rupees in reserve. We have to invest about 5. 5 billion in three to four years. This means we have a net annual profit of 950 million rupees and cash flow is 1 billion rupees. We don't have any problem to inject money in four projects. We have cash flow for another 200 MW projects. Chilime can alone manage this money.

Why is the Employees Provident Fund so interested on your project?

There is a very low risk for Provident Development Fund. There is diversification of investment. Even Chilime's annual income is a guarantee for repay.

The pay-back period of all these projects is 5 to 7 years. Chilime' annual cash flow is 1.20 billion rupees. The profit is around 1 billion rupees.

What will the financial status after completion of these projects?

After completion of these four projects, we will have 4-5 billion rupees in annual turnover. This means we will be in a position to construct the project up to 500 MW.  It will take another 2 to 2.5 years to start the project over 500 MW. If we start the project after 2015, we don’t need cash flow and Chilime alone can invest it.

How about the public response?

Due to credibility of Chilime, we can generate money from the general people. Last year when we issued 270 million rupees worth of share and there were more than 5 billion rupees collected. There is a lot of possibility to lure public equity, including that of Nepalis and foreigners. We can also initiate other projects under our four P model. Citizen Investment Board and Provident Fund have expressed their desire to continue with joint partnership.

How do you see the investment capability of Chilime?

After 2016/17, the repayment money of Upper Bhotekosi will be enough to start the project over 1000 MW. If we have good projects, we don't need to worry for the money. There is money within the country. It is unfortunate that we don't have any new projects.

Do you have any plan to go for storage project?

We are now trying for 300 MW Uttar Ganga storage project in Baglung. Since it lies in protected areas, it is in the process of clearance. There is another 232 MW project in Langtang. This project also lies within national park. We have already applied for clearance. However, the government has rejected our demand to start Upper Arun.

What does Chilime require now?

Chilime needs more license immediately so that we can work for future. If we wait saying that new projects will follow these projects, our position will be like that of the past. We need to have a plan to mobilize the same manpower, for another four future projects. Our money is idle. We have already transferred four projects to the company. We need more new projects. We are now looking for 536 MW Sunkosi project just close to Dolalghat. We cannot launch any project in future without involvement of the local people.

How do you see the possibility for storage projects?

Although the rate of return is high in storage project, I don't see any possibility of private investment in storage projects due to involvement of cost and risk. Private sector will enjoy run-off-the river project.  Nepal needs storage projects to reduce the loadshedding. However, the PPA status of storage projects is not so encouraging. Utter Ganga is high head and low cost project, but there is the need to revisit tariff.  

Do you mean the storage projects are not profitable?

Storage projects are profitable, but it is impossible in the current state of PPA. We are exporting power from India average of Indian Rs.5.4 at the border point. It will cost Nepali Rs.15.00 to 16.00 per unit when it reaches to the consumer. However, it is a firm energy and it is still cheaper. The tariff for storage project must be fixed up to Rs. 10.00 per unit as par with exported energy. We are public entity and we don't want high return but reasonable return.

There is the need to complete the grid connection with India and it will help Nepal-India free trade. Cross border work is also needed to open the market. If we are unable to open cross border market, we cannot enhance our capability making hydro electricity cheaper.

How can we end the load shedding?

Focus should be given to cross border transmission line. It should be worked out in two places with priority. The government needs to invest heavily on mega projects, small projects should be given to private sector and medium scale projects for companies like Chilime. We need to act now. There is no sense in saying that there will be spill after 2017. We need to go immediately for Budhi Gandaki. Looking at the current state, I can say that loadsheeding will continue for another decade.  Had we designed our projects under Q 40, the generation capacity would have gone much higher. We have just followed Q25 model looking at Nepal Electricity Authority. Arun III and Upper Karnali have increased their capacity choosing Q 40 model.

Nepal's hydropower generation cost is relatively high. How do you look at it?

Our electricity is not competitive for India because we failed to use the monsoon water due to our current model. We have constructed the project looking at the demand of winter, this is the reason the tariff of Nepalese electricity is expensive. We need cross border transmission line for energy management. Our hangover is energy export to India. The situation is that we also exporting over 180 MW of power now just to maintain 12 hour load shedding.  Once we have cross border transmission line, everything will be settled. We can export our surplus electricity to India during rainy season and import power during the dry session. If we supply our energy of wet period, the power will be like produced from storage project. There is a great potential for energy banking.

How do you see the controversy on PPA with Chilime?

Our PPA is not much expensive compared to other two IPPs. Our per unit price is Rs. 6.69. This is not expensive. We are providing 17 percent excessive energy and we get just 50 percent money. Chilime's average price is Rs 5.95 with per unit and 10 percent free. We have been supplying 22 MW firm power even in dry session. Our energy is very valuable for load shedding hour. Out of total profit, 51 percent goes to NEA and 49 percent to Nepalese people. Our money is going to poor people of Nepal not an account of private party. The poor people of Rashuwa are getting the money. We are investing the money to enhance other projects.

Don't you see your energy price is still expensive?

If you look at Khimti, it is about 20 cent (Rs.20) per unit in dry session. Even Bhote Kosi is charging less than 10 cent per unit. If you compare our price, it is still less than half of these two private projects. Khimti has not invested any money for new projects. They have not given even a penny of shares to local people.

Don't you see any project prospects in Rasuwa basin?

Yes there is a good project within Rasuwa. However, Department of Wildlife and National Park has creating hurdle for project development. I don't understand why national parks want to occupy rivers. There is 250 MW project in Ghoda Tabela in Langtang. Our intention is not to destroy fauna, flora and endangered species of Langtang, just to protect them. We have planned to expand cable car, along with hydropower. Our plan is to build the cascade up to Kenjen valley as a reservoir. This water will help to increase capacity of power projects beneath Chilime. It will also increase the level of water in Gandak during winter.