Chilime to cap price for next 4.5 yrs

Chilime to cap price for next 4.5 yrs
eKantipur.com, 28-Jul-2007
BY BIKASH SANGRAULA

The 20 megawatt Chilime Hydroelectric Project, which went from fame to infamy for first being an indigenous and cheapest power producer in the country and later the most expensive power vendor to Nepal Electricity Authority (NEA), will put a cap on its existing selling price for the next four-and-a-half years.

"A board meeting of Chilime Hydropower Company is taking a decision to this effect Sunday," said Gokarna Prasad Sharma, board member of the company, whose 51 percent shares are owned by NEA, and 25 percent by NEA employees. The remaining 24 percent shares are being issued to the public by the end of this fiscal year.

Chilime has an agreement to raise the price of electricity it sells to NEA by eight percent annually, the highest raise NEA has agreed to its suppliers.

"The project came into operation four-and-a-half-years later than scheduled, but the power price was adjusted even for that period," said Sharma. "The project has, therefore, decided not to raise power price for the next four-and-half years in view of the raise that was made even during the delay period," Sharma explained.

Owing to the eight percent annual increment, Chilime currently sells electricity to NEA at Rs 6.17 per unit, which is the highest price NEA pays to any supplier. NEA's average retail price is Rs 6.5 per unit. In 1995, NEA signed a Power Purchase Agreement (PPA) with Chilime at Rs 3 per unit, which was to be applicable from 1999, the original scheduled deadline for the project's commissioning. However, the project came into operation only in the later part of 2003, and by that time, the price had already shot up to nearly Rs 4.

According to Sharma, there have already been increments eight times in the price of power the project sells to NEA, including the period of delay.

"The maximum number of times the increments can be made, according to the existing agreement, is twelve, after which the price will remain constant" he said.

Chilime was built entirely through indigenous labour and capital, with the production cost at just Rs 2.19 per unit, the cheapest in the country, due to which the country's entire power sector and the media praised it, until the price arrangements came to light in recent months.

In the fiscal year 2006/07, NEA registered a net loss of Rs 2.4 billion, of which it lost Rs 1.75 billion in transactions with Chilime, the 36-megawatt Bhotekoshi and the 60-megawatt Khimti projects, with which NEA has "take or pay" agreements.

On the other hand, the three producers pocketed a total profit of Rs 1.4 billion in the same fiscal year, of which Chilime netted Rs 380 million.

Chilime project, located in Rasuwa district, is connected to the national power grid through a 38-km 66kV transmission line of the Trishuli-Devighat sub-station.