The Nepal Electricity Authority (NEA) on Friday signed its first ever power purchase agreement (PPA) with a storage type hydropower project. The state-owned power utility sealed a deal with its subsidiary Tanahu Hydropo- wer Limited (THL) which is developing the 140 MW Tanahu Hydropower Project.
The reservoir type project is being built on the Seti River in Tanahu district in central Nepal. NEA Managing Director Kulman Ghising and THL Managing Director Pradeep Kumar Thike signed the agreement on behalf of their respective organizations. As per the PPA, the NEA will pay THL Rs12.40 per unit of electricity during the dry season which lasts from December to May, and Rs6.08 per unit during the wet season which lasts from June to November. The PPA also includes a provision under which THL can increase the power purchase rate by 3 percent annually for eight years after it commences commercial generation. After the increase, the NEA will have to pay Rs15.38 during the dry season and Rs7.54 during the wet season.
However, if the project fails to generate 35 percent of the projected output during the dry period, it will be considered to be a peaking run-of-the-river type project, according to PPA. If it is classed as a run-of-the-river scheme, the NEA will pay Rs10.55 per unit during the dry season and Rs4.80 per unit during the wet season. As per the contract, the project has to produce 178.9 million units of electricity during the dry season while the generation during the wet season should be 323.6 million units, the NEA said in a press statement.
THL has sealed a power purchase deal with the NEA, but the construction of the power station is yet to start due to delays in appointing contractors. The company has signed a memorandum of understanding with Sinohydro Corporation to implement the hydro and electromechanical works of the Tanahu Hydroelectric Project, but it is yet to sign the actual contract.
Likewise, there has been no progress in appointing a contractor for the first package of the project which includes the preparation of a detailed design and the construction of the headworks. The Tanahu Hydroelectric Project will be one of the biggest reservoir projects in the country with an estimated annual energy generation capacity of 587.7 GWh in the first 10 years of operation.
The project can generate energy for six hours daily during the dry season. It is being built using credit extended jointly by the Asian Development Bank, Japan International Cooperation Agency and European Investment Bank.