Kabeli-A is a run-of-river project in Panchthar district with an installed capacity of 37.6 MW. The energy output will be connected to the national grid via the Kabeli Corridor Transmission Line, a separate project under construction with World Bank financing.
Kabeli-A was among the projects short listed in the late 1990s on the basis of a screening and ranking exercise. Following an international competitive bidding process in 2007, the government offered the contract on build, own, operate and transfer (BOOT) model to Kabeli Energy Ltd. The company will invest $ 23 million towards the $ 108.6 million cost of the project. This World Bank-IFC project will demonstrate how public-private partnerships can help Nepal exploit its hydropower potential and eliminate electricity deficits while also developing hydroelectricity exports as an engine of the nation’s economic growth,” said Johannes Zutt, World Bank Country Director for Nepal.
The project has three components. Kabeli Energy Ltd will implement the first component to build plant infrastructures including a diversion dam, a settling basin, a headrace tunnel, a semi-underground powerhouse and a tailrace tunnel.
The second component will support the Ministry of Energy in supervising implementation of the project in compliance with technical, environmental and social safeguards and to improve its capacity in overseeing hydropower development.
The third component will support the Investment Board of Nepal in improving its ability to facilitate the development of large hydropower projects in line with applicable international technical, environmental, social and performance standards.
“The project design reflects the lessons learned from hydropower projects worldwide, including those in the Himalayas where similar conditions exist,” said Jie Tang, World Bank Lead Energy Specialist and Task Team Leader for the project.
Source:- Republica
Isn’t the project cost too high given the total cost is US$ 108.6 million for just 37.6 MW? Is it just me or any other people think the way I am thinking. Involving IFC becomes costly affairs. Their so called due diligence, international consultants, international standards and practice simply adds up the unnecessary cost. Being myself a hydropower analyst, here is my sincere calculations. Before that, here are my sincere assumptions to reach this conclusion
ReplyDelete1) US$ 108,600,000 x NRs. 100 = NRs 10,860,000,000 (total project cost in Nepali Rs.)
2) Per MW cost would = NRs 10,860,000,000/37.6 = NRs. 288,829,787 per MW (Typically, the nature of Nepali rivers and the PPA rates would support project that is not more than NRs. 160,000,000 per MW at present)
3) Assuming plant factor of 65 percent which is the typical nature of RoR project in Nepal, the annual energy production would be around 214,094,400 kWh.
4) The standard PPA rates applicable is NRs. 8.40 per kWh for dry season and 4.80 per kWh for wet season and by assuming 16.15% to be the dry energy which is also a typical nature of Nepalese RoR project, the weighted average energy selling price would be around NRs. 5.40 kWh. That means the first year revenue would be NRs. 1,152,097,306.
5) As for the tariff escalation, I assumed 3 percent (simple growth) for the 5 years from the COD. This is the standard escalation.
6) By reading the above article, I assumed the debt equity ratio of 78:22 (78 percent debt and 22 percent equity)
7) Considering interest rate on debt from IFC to be 4% (This is what I read in the newspaper few months back)
8) I assumed loan tenure of 12 years from the COD. (In this project, it could be extended which I clearly do not know. However, it will not affect results. At least Project IRR)
9) As for the O&M, Royalty, Tax and so on, I considered the applicable government laws and my past experience in constructing hydropower projects.
Here are the RESULTS:-
Project IRR :- 8.26%
Equity IRR:- 11.97%
Now these results create a greater concern. I understand getting soft loan of 4 percent is highly desirable. But getting soft loan from international organization like IFC comes with additional cost. Their international procedures, consultants and so on add significant cost to the project. For instance, the per MW cost of Kabeli 37.6 MW project is around 29 crores per MW when ongoing rate in Nepal is not more than NRs. 16 crores per MW.