Exploiting hydropower in mountainous Nepal

Hydropower is the main form of power generation in Nepal, however it is relatively under-developed, with only a small portion of exploitable capacity already developed or being developed as installed capacity. Meanwhile, the nation’s electricity supply is extremely insufficient, especially during the dry season. Even in Katmandu, the capital, a rolling blackout system is implemented.

GOLDEN OPPORTUNITIES

The Nepalese government has introduced many preferential policies to attract foreign investment. In the field of hydropower development, a power plant company may sign a Power Purchase Agreement (PPA) directly with the Nepal Electricity Authority (NEA); a “take or pay” clause may be negotiated with the NEA and inserted in the PPA; and pricing and payment in US dollars may be negotiated with the NEA for projects with large installed capacity. Chinese enterprises are following up or developing quite a few hydropower projects in Nepal, among which at least three have begun construction and one entered commercial operation last year.

In recent years, Nepal’s government has promulgated and revised a series of laws and regulations to improve the foreign investment environment in Nepal. These include the Industrial Enterprises Act, the Private Finance in Construction and Operation of Infrastructure Act, and Foreign Investment and Technology Transfer Act. In addition, pursuant to its “single window for foreign investment” policy, foreign investors can apply for approvals and licences for matters such as company registration, project land, etc., through a “window” committee, which simplifies and shortens administrative procedures.

WANG JIHONG is a partner and Xu Yibai is an associate at Zhong Lun Law Firm