Enron Renewable Energy Corporation is lobbying with the Nepal government for the mandate to build two of Nepals ambitious hydroelectric projects, but the government insists on selecting the bidder through competitive bidding.
The Nepal government said it would award the mandate for the Arun-III hydel and Karnali multipurpose projects after evaluating various proposals by the bidders.
Nepals mega-hydro projects Arun-III and Karnali will have initial capacities of 402 mw and 3,000 mw respectively. The latter will have the potential for expansion up to 10,800 mw. The lions share of power generated from these projects will be sold to China and India while the remaining would be sold to the Nepal Electricity Authority.
Enron had expressed its desire to develop, finance, construct, own and operate the Karnali project. The company said the project would supply power under the terms of a power purchase agreement (PPA) with the government of Nepal as well as PPAs with other energy users, India and/or China.
However, in response to the Nepal governments insistence on competitive procedure, the US power giant, in a recent presentation to the Nepalese authorities, made a case for the memorandum of understanding (MoU) approach to settle the award for the hydel projects.
The objective of transparency is fairness and definition of the terms of doing business, Enron said. The government of Nepal has invited development of hydro resources in Nepal with limited success. Fairness has been satisfied. The MoU approach provides for transparency through defined business terms up front, the Enron presentation said.
The revenue scenario of Nepal could gain from royalties, income taxes, export and import taxes. Enron pointed out that competitive bidding would lower the value of Nepals water resources and will drive the power price down. The company also noted that if the royalties, income taxes and export taxes are defined by existing Nepalese law, what is left to bid?
Enron has also included in its proposal the potential to market the downstream benefits of Karnali to India. While stressing the need for financial strength and experience to develop a hydropower plant, Enron said it has significant financial resources and substantial equity investment ability.
Enron warned that delays would cost up to $ 2.4 billion lost power revenues and up to $ 949 million lost tax revenues per year. The market timing is now. Current energy demand in India and China requires import of energy. The window of opportunity to sell power to India and China may not last, Enron said.
Hence the next steps should be to sign the MoUs, review feasibility studies and design data, seek power contracts and develop financing plan, Enrons presentation said.
