Experts seek innovative ways of financing in hydro

Experts and industry insiders called for more optimizations and innovative ways of financing in a bid to further develop Nepal’s hydropower sector.
Speaking during a panel discussion, ‘FDI in Nepal’s Power Sector,’ during Nepal Power Investment Summit here in Kathmandu on Sunday, the developers said that at a time when the per capita energy consumption in Nepal was low, there was no way than attracting foreign investment in Nepal’s power landscape.
“However, since hydropower projects are capital intensive and have longer gestation period, innovative financing solutions like equity financing is the game of the time,” says Rajen Kandel, Director of Kandel Group. According to him lack of investment opportunity within Nepal and the growing demand of energy every day offers high level of investment scope to the international investors to build hydropower projects in Nepal.
N. L. Sharma, Chairman of Satluj Jal Vidyut Nigam however pointed out political instability, lack of tax incentive, hassles during the land accusation and clearance of forest and environment as some of the factors distracting FDI in Nepal’s energy sector. He informing that the Nigam invested Arun III 900 MW hydropower project was soon kicking off also suggested government to make sure to develop transmission lines before the completion of any hydropower projects.
The speakers also called for independent power sector regulator to check the demand and supply side situation as well as to fix the energy tariff.
Apar Neupane, Vice-President, Finance at Equicap Asia opined that the mismatching of several stakeholders’ interest was biggest hinder for FDI to come to Nepal. “From the government to the project affected area, from the developer to contractor and financer, there are multiple stakeholder involved,” he elaborates, “Unluckily, they have their own interests. The more their interests collide, the project less likely to succeed.”
Joseph Hoess, Director of Dragon Capital, Vietnam says that the hassles that any foreign investors have to go through while doing ground works were what was aggravating the situation. “We are private sector that looks to maximized return within short period of time, but here in Nepal we have to invest more than five years doing basis things, getting approvals and clearances,” he expresses, “Nobody is interested in spending such a longer time for all those trifles.”
Likewise, Gorakh SJB Rana, Head of Commercial and Global Banking at Standard Chartered Bank said that the Nepal’s banks have not been able to extend sufficient financing for the hydropower projects due to the lack of communication. “Of late, we are in correspondence with some of the large hydropower developers,” he says, “It’s not that Nepal’s banks can’t bank hydropower projects, but what is lacking the moment is proper communication.”
Naoki Nishimura, a JICA representative urged for strong local partner to attract the FDI. “The efficient local partner with ability to equity financing and doing background work for the foreign investor can play a significant role in bringing in huge amount of foreign investment of Nepal’s energy sector,” he said.
A three day long international power summit began from Saturday in Kathmandu. Organized by Energy Development Council (EDC) with an objective to introduce Nepal as a safe investment space especially in the hydropower sector of the country, the event has brought about 55 international speakers under the same roof.
A total of 350 delegates from 24 countries including those from SAARC Region, Europe, China, Korea and the US, among others are participating the event that will last till Monday.
According to the organizer the major highlights of the event will be to attract FDI in Nepal’s hydropower sector and present bankable energy projects to the international community. Also the major highlight of the event is EPCF training to the developers and investors which will enable them to approach the investors for right projects in right manner. The training to be held on the last day of the summit will be conducted by world renowned trainers from international agencies like Stakraft, Norconsult, The Nature Conservancy, NHA, Nari and CNESA, among others.
A total of 55 participants have confirmed to join the training session.