PPA Dispute Delays Transfer of 50 Percent Ownership of Khimti Hydropower to Government

A dispute over power purchase rates has stalled the transfer of a 50 percent stake in the 60 MW Khimti Hydropower Project to the government, with the handover now more than five years overdue.

Nepal Electricity Authority (NEA) and the promoter company have failed to agree on a new tariff rate for the electricity generated by the plant, a prerequisite for finalizing the share transfer.

The 60 MW Khimti Hydropower Project, built by Himal Power Limited, involves investment from Norwegian stakeholders.

According to the agreement between the government and the promoter company, Himal Power Limited, 50 percent of the project's shares were supposed to come under the ownership of NEA from July 11, 2020. However, the share transfer has yet to take place, even though the deadline has passed by five and a half years.

NEA's Managing Director, Hitendra Dev Shakya, stated that the share transfer has not been completed so far because an agreement could not be reached between the Authority and the promoter company. According to him, the shares have not been transferred to the Authority's purview due to a failure to agree on the Power Purchase Agreement (PPA) rate.

"The promoter company does not agree to the rate we have proposed, and we cannot accept the rate they have offered," Shakya said. "We are seeking further financial and legal advice from consultants to resolve the issue." However, he declined to specify the rate proposed by NEA and the rate offered by the promoter company.

Himal Power Limited is owned by multiple entities. Nepal's Butwal Power Company Limited holds 16.90 percent of the shares. The remaining ownership lies with Norwegian companies, including Statkraft SF and Alstom Power AS. The company's paid-up capital is Rs 1.76 billion.

Hydropower projects constructed by the private sector are required to be transferred to the government after a certain period. As this is the first project to be transferred from the private sector to the government, it is being viewed with high priority.

Ministry of Energy, Water Resources and Irrigation Secretary, Chiranjivi Chataut, informed that a committee has been formed under the coordination of NEA Board Member Rohit Paudel to foster an agreement between both parties regarding the share ownership transfer. According to him, the committee, formed in between mid-August and mid-September, is holding further discussions to facilitate an agreement between NEA and the promoter company.

Although discussions with the promoter company have been ongoing for the past two years, no concrete decision has been reached so far. To complete the share transfer process, a joint venture company needs to be established with ownership from both NEA and the promoter company. Subsequently, that company would enter into a power purchase agreement with the Authority. However, such a joint company has not yet been formed. NEA Managing Director Shakya mentioned that work on establishing the joint venture company will proceed only after both parties agree on the PPA rate.