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Nine years after signing a power trade agreement (PTA) with India, Nepal is preparing for the same agreement with its northern neighbor. Nepal and China are expected to sign a bilateral power trade agreement during Prime Minister Pushpa Kamal Dahal's forthcoming China visit. Prime Minister Dahal is set to visit the northern neighbor in the last week of September.

A senior official of the Nepal Electricity Authority (NEA) said that preparations are now being made to sign a power trade agreement with China during Dahal’s visit. According to him, the agendas of the visit are being prepared in collaboration with the Ministry of Energy, Water Resources and Irrigation. “There is still about a month left for the Prime Minister’s visit to China. The agenda has not been finalized. However, we are planning to conclude the PTA with China during his visit,” he said.

Prime Minister Dahal himself has said that a PTA will be signed during his China visit. Addressing a public function in Chitwan on Saturday, Dahal said there will be a new power trading agreement with China and soon, also with Bangladesh. 

In the last five years, there has been more engagement between Nepal and China in energy sector cooperation. Both countries signed a memorandum of understanding on energy cooperation on 21 June 2018. During Chinese President Xi Jinping’s Nepal visit in October 2019, both countries agreed to bring into full play the Joint Implementation Mechanism (JIM) on Nepal-China Cooperation in the energy sector. Both sides agreed to jointly carry out Nepal-China Electric Power Cooperation Plan and make the plan as an important reference for the next step of bilateral electric power cooperation and promote its implementation.

In the first meeting of the Joint Working Group formed for energy cooperation between Nepal and China in the last week of February this year, the Chinese side formally made a proposal to purchase electricity from Nepal. The northern neighbor wants to purchase power for its autonomous state Tibet which borders Nepal. According to Nepali officials, China wants to import electricity from Nepal, especially for the winter season.

Apart from PTA, Nepal is also proposing one more cross-border transmission line between the two countries during Dahal’s visit. According to NEA officials, there is a proposal to construct a 400 KV transmission line at Kimathanka-Arun point.

While China has sought electricity for the winter season, Nepal currently is not in a position to supply power to the northern neighbor mainly due to a lack of cross-border transmission line between the two countries.

Currently, both countries are doing homework to construct the 400 KV transmission line connecting Nepal and China. The NEA has already completed a feasibility study of the proposed Ratamate-Rasuwagadhi-Kerung Transmission Line Project. NEA Engineering Company, a subsidiary of NEA, is taking charge of the environmental impact assessment (EIA) of the project.

The construction of the proposed 400 kV transmission line from Ratamate (Nepal) to Kerung (China) will form a basis for power trading between Nepal and China in the years to come, according to NEA. According to NEA officials, since India does not buy electricity generated by projects where Chinese investors and contractors are involved, the Ratamate-Rasuwagadhi-Kerung Transmission Line Project will be vital for attracting Chinese investment with the objective of selling power to China.

Energy Ministry sources said that the construction and investment modality of the Ratamate-Rasuwagadhi-Kerung Transmission Line Project will be finalized during the Prime Minister’s visit.

The Nepal section of the trans-Himalayan transmission line will have a length of 70 km and 212 towers. The feasibility study of the project has shown that an investment of Rs 13bn is required to build the transmission line of the Nepal section. Officials said the 70km project which can carry 5,000MW of electricity would open the door for power trade between Nepal and China.

According to a Nepal Electricity Authority (NEA) official, both countries during the February meeting had agreed to study how much electricity Nepal can be supplied to Tibet in winter and how much power Tibet can purchase.

The Nepal Stock Exchange (NEPSE) plunged by 31. 80 points to close at 2,045.44 points on Tuesday.

Similarly, the sensitive index dropped by 6. 29 points to close at 391. 84 points.

A total of 5,603,179-unit shares of 278 companies were traded for Rs 2. 15 billion.

Meanwhile, Emerging Nepal Limited was the top gainer today with its price surging by 5. 18 percent. Likewise, Himalayan Distillery Limited was the top loser as its price fell by 7. 69 percent.

At the end of the day, the total market capitalization stood at Rs 3. 06 trillion.

The gold is being traded at Rs 111, 300 per tola in the domestic market on Tuesday.

According to the Federation of Nepal Gold and Silver Dealers’ Association, tejabi gold is being traded at Rs 110, 750 per tola.

Similarly, the silver is being traded at Rs 1,380 per tola today.

As one-third of the hydropower projects that have entered power purchase agreements (PPAs) with the Nepal Electricity Authority (NEA) are yet to complete their financial closure, the state-owned power utility is preparing to scrap their PPA agreements.

The NEA is taking such a decision based on the suggestions of the committee formed under the coordination of Sandeep Kumar Dev, joint secretary of the Ministry of Energy, Water Resources and Irrigation.

The Dev committee has recommended that power purchase agreements (PPAs) for projects with a capacity of up to 100 MW be revoked if they do not achieve financial closure within two years after the PPA is signed. For projects exceeding 100 MW, the committee proposes canceling their PPAs if they do not achieve financial closure within three years of signing the PPA. The committee has recently submitted its report to Energy Minister Shakti Bahadur Basnet.

According to the report, the NEA has so far entered into PPAs with hydropower projects of 7757 MW capacity. However, 33.85 percent of the projects have not completed their financial closure, according to the report. Of the total PPAs, commercial production worth 2023 MW has been started while financial closure of 3102 MW has been completed.

Along with the cancellation of PPA, the committee has also recommended the cancellation of survey and generation licenses issued for such projects. The report even recommended that the Department of Electricity Development (DoED) can scrap the project license of the projects failing to complete financial closure.

Many hydropower promoters have not been able to raise investment for their projects even after signing the PPAs. Since the government has set a quota for PPA, the delay in financial closure, according to NEA officials, has stalled the hydropower projects' construction.

“The construction of the hydropower projects will not move ahead unless the promoters complete the financial closure. Since there is a quota system in place for the PPA, the new projects’ PPA has not been carried out,” said Pradeep Kumar Thike, one of the members of the committee. “Hence, the committee recommended the cancellation of the PPA.”

The committee has also recommended giving priority to the PPA of hydropower projects promoted by the government, subsidiaries of the NEA, and companies owned by the government.  In its report, the committee has said that PPA with the private sector projects should be done only after considering the internal demand and the possibility of export of electricity.

If this policy is implemented by the government, it will be difficult to get PPA for private sector projects, said IPPAAN chairman Ganesh Karki.

The committee has recommended increasing the PPA quota for run-of-river (RoR) projects and peaking run-of-river (PRoR) projects by 3937.5 MW. As the PPA of government projects having a capacity of more than 3,000 MW is yet to be done, the new policy will benefit the state-promoted projects. “Even if the quota of PPA is increased as recommended by the committee, the private sector will get less benefit,” said Prakash Dulal, deputy secretary general of the Independent Power Producers' Association Nepal (IPPAN).

The IPPAN has demanded to extend a special period of one year for projects that could not achieve financial closure after signing the PPAs. Organizing the press conference on Sunday, the IPPAN asked the government to provide one year time for the projects to complete their financial closure.