Decks have been cleared for the private sector to get into transmission lines construction.
A board meeting of the Nepal Electricity Authority (NEA) on Monday decided to allow the private sector to invest in transmission line projects. Till now, NEA was the sole entity permitted to build transmission lines in the country.
As per NEA board decision, the private sector will be allowed to invest in transmission line development projects under the build, own, operate and transfer (BOOT) model.
NEA board member Damber Nepali said the private sector would be allowed to develop such projects on condition that the NEA would take the projects over after 15 years.
Initially, only smaller domestic projects, with costs up to Rs 500 million, will be given to the private companies as trial.
“We decided to award private companies smaller projects in the initial phase because neither they have the experience in building transmission lines nor the government has any experience in monitoring such projects executed by private investors,” said Nepali.
Another senior NEA official said: “Their (the private investors’) performance in the trial phase will determine whether they will be awarded larger scale and cross boarder projects.”
Currently, NEA is working on the modality, based on which transmission lines projects will be awarded to private companies. A team led by Rajeshwor Man Sulpiya will study various international models and prepare the most suitable and investor-friendly system to make private investors feel comfortable. The proposed modality is expected to institutionalise the private sector investment in the construction of power lines.
Previously, the Energy Ministry had proposed that an individual investor/firm be allowed to invest up to 33 percent of the total cost of a transmission line project. It had also recommended that the government allow the private sector to erect transmission lines under two models — Build-Own-Operate-Transfer (BOOT) and Build and Transfer (BT).
The private sector had long been demanding that they be allowed to develop transmission lines projects. A number of companies, including Himalaya Energy Development Company (HEDC), have even submitted proposals to obtain the Energy Ministry’s go-ahead in this regard.
HEDC has proposed building the 132KV Khimti-Gajryang transmission line under the Build and Transfer (BT) modality.
The idea of inviting the private sector in transmission line construction is not new. The Interim Plan has envisioned involving the public and private sectors, community and cooperatives in power generation and transmission.
The government has planned to construct 408 km transmission lines in the current Interim Plan (2010-11 to 2012-13). However, not a single transmission line project has been completed although the NEA has already started work on the Bharatpur-Hetauda, Khimti-Dhalkebar and Thankot-Chapagaun-Bhaktapur lines.
“As the private sector is more flexible in project development than the NEA and they can also encourage local people, private investors’ involvement in transmission lines will benefit the country’s power sector,” said Nepali.