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November, 2003 |
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Editorial |
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Cheap Chilime? Any
promise for cheaper electricity is a sweet music for the Nepalis who
have been complaining of being forced to pay one of the highest price
for electricity in the world. For that reason, the protagonists behind
the 20 MW Chilime project deserve wholehearted kudos as the reports say
that the generating cost of the project is a mere Rs. 2.19 per unit, and
selling that to Nepal Electricity Authority (NEA) at Rs. 5 per unit as
per the Power Purchase Agreement (PPA). Still the Chilime company will
make good profit. That means if all the power projects were like Chilime,
the country's power bill would have been significantly lower than what
it is today. But,
unfortunately, it is too early to be so euphoric. There are a number of
questions still unanswered. Even
when we assume the quite improbable that all the chiefs of the future
power projects would be as honest as Dr. Damber Nepali of Chilime
project and that they would be assisted by equally independent minded
and energetic seniors in the water resources ministry and/or NEA, the
problems of the financing and technology would still remain there. Hydroelectricity
projects, unlike their thermal counterparts, are location specific,
causing additional transmission cost both in terms of initial capital
cost as well as the recurring operational cost. In the present context,
they are also more vulnerable from security point of view. And
there is no standardization in the hydroelectricity power plants. Every
project has to be tailored carefully to suit the specific location.
Equally importantly, such a plant has to stay put where it is installed:
it cannot be shifted elsewhere, unlike in case of the thermal plant. These
facts make a stronger case for thermal plants rather than hydro, and for
the big projects rather than small ones. Thus the argument that
hydroelectricity development in Nepal can be possible with the domestic
investment alone seems to be overambitious. According to the information
being made available, the major investor in Chilime are Employees'
Provident Fund and Citizen Investment Trust - both controlled by the
government. For a company majority held by another state controlled
unit, NEA, it would not be so difficult to arrange funds from these
financiers. Though the company people mention also the names of some
private sector banks as the investors, their exposure to this project is
very low. More
importantly, Chilime power is likely to be costlier in few years than
Khimti and Bhote Koshi as the rate of annual increment in the price is
higher in case of the PPA that NEA has signed with Chilime. Equally
important are the reports that many costs incurred in Chilime are not
accounted for in this project's books. One example is the administrative
and technical support provided from NEA. Next is the cost of
transmission line stretched specially for Chilime from its project site
to Trishuli. Finally, it is also doubted whether the project's insurance
cost and the revenue loss of two years are accounted for. It would be better for the Chilime company to clarify those concerns before issuing shares to the general people. |
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Cover Story
| Editorial | Biztoon
| Political |
Economy & Policy | Management
| SME Focus |
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Send your feedback to the editor: bizline@mos.com.np |
