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Nepal
>> Regional Overview >> Nepal Overview ACTIVITY DATA SHEET
PROGRAM: Nepal
TITLE AND NUMBER: Increased Private Sector Participation and Investment in Environmentally and Socially Sound Hydropower, 367-004
STATUS: Continuing
PLANNED FY 2001 OBLIGATION AND FUNDING SOURCE: $185,000 DA
PROPOSED FY 2002 OBLIGATION AND FUNDING SOURCE: None.
INITIAL OBLIGATION: FY 1998 ESTIMATED COMPLETION DATE: FY 2001Summary: Nepal's tremendous hydropower potential, believed to be over 80,000 megawatts (MW), provides the most promising economic growth opportunity for the country, and is a source of clean energy for the region. This program is designed to help the Government of Nepal (GON) improve the policies and procedures for hydropower investment and to strengthen the capacity of Nepal's lead institution for promoting private investment in hydropower-the Department of Electricity Development. Besides encouraging investments, the program will strengthen local capabilities to ensure that investments are environmentally and socially sound. Program results to date are laying the foundation for continued improvements in the policy and regulatory framework for private development of Nepal's hydropower potential.
This objective supports the U. S. Government's goals of reduced global warming and a sustainable world environment. Hydropower development provides a clean, renewable, and environmentally friendly source of power to an energy-hungry region, while promoting U.S. business. At the same time, hydropower development will reduce Nepal's dependence on foreign donors, improve the quality of life in Nepal, and strengthen regional cooperation.
Only 15% of Nepal's 23 million people have access to electricity. Currently Nepal is barely able to meet even its modest peak electricity demand of 351 MW. The Nepal Electricity Authority has projected that the demand for electricity will grow by more than 8% per year and that peak demand will double by 2006. India, a good potential market for Nepal's excess hydropower, is experiencing critical energy shortages and is dependent upon environmentally unsound means of generating power.
Key Results: Two key results will indicate that this objective has been achieved: 1) the number of private sector companies particularly in hydropower development will increase from two (1997) to five (2001); and 2) local capabilities will be strengthened so that private financial commitments for environmentally and socially sound hydropower investment increase from $238 million (1997) to $475 million (2001).
Performance and Prospects: To help Nepal tap its tremendous potential for private sector investment in hydropower development, USAID provides training and technical assistance to the GON's Department of Electricity Development to do the following: 1) develop supportive policies and procedures for hydropower investment; 2) improve the "one window" facility for investment; 3) monitor investor compliance with social and environmental mitigation requirements; 4) increase use of competitive contracting procedures; and 5) improve Nepal's capacity to negotiate and sign equitable power purchase agreements and power supply contracts with international and local private power-developers.
For several years, USAID has been playing a critical role in helping Nepal develop an investment environment which has been able to attract several hundred million dollars of private and other donor investments in hydropower development. In the single largest U.S. investment in Nepal, Panda Energy International, Inc. of Texas and Harza Engineering of Chicago invested $98 million in the Bhote Koshi Project. Recognizing that continued assistance was needed in this sector to build on prior U.S. Government investments, USAID and the GON began this three-year $5 million hydropower special objective in December 1997.
To bolster environmental and social soundness of hydropower investments, USAID is strengthening local capability to conduct social and environmental impact assessments. The number of public hearings for hydropower projects conducted with local stakeholders and NGOs increased from four to nine during the same period, reflecting more rigorous environmental and social impact assessments being conducted with USAID assistance.
The program encourages more public hearings in the investment process, thereby improving transparency and assuring that needs of local residents are heard and addressed. Implementation progress continues despite minor setbacks from the frequent changes in government and delays in approval of the World Bank's new Power Development Fund (PDF). The program achieved several important milestones during the last 24 months, including commitments by three more independent power producers for projects valued at $65 million, bringing the total private investment to over $303 million to date.
USAID also supports a U.S. Energy Association (USEA) partnership program through which USEA will help U.S. utility companies develop long-term cooperative relationships with the Nepal Electricity Authority, and in the future with Nepal's first private utility company. This partnership will promote the transfer of the U.S. energy industry's best technologies to the Nepali utilities as well as provide long-term business opportunities to U.S. companies.
Possible Adjustments to Plans: This objective is being replaced by a new objective (367-006) as part of USAID's strategy for FYs 2001-2005. This objective addresses the long-term energy needs of Nepal, and complements the South Asia Regional Initiative on Energy (SARI/Energy), which was launched in FY 2000. A critical assumption of SARI/Energy is the continuation of the bilateral energy programs that will address the issues of energy sector reforms, institutional strengthening, and regulatory frameworks. Regional cooperation and trade in clean energy offer great potential for advancing sustainable economic development in South Asia and significant investment opportunities for domestic and U.S. private companies. SARI/Energy also addresses the issue of global warming through clean energy exports from Nepal to the polluting regions of South Asia.
Other Donor Programs: USAID has participated substantively in discussions with the World Bank and the GON regarding the PDF, which is expected to be in place sometime in 2001. USAID consultants will assist the GON in completing the implementation guidelines for the PDF, the model request for qualifications and other PDF design documents. The PDF and the USAID program will be mutually supportive in the development of hydropower in Nepal. The PDF will provide $175 million in funds-$100 million to leverage private investments at an expected ratio of 3:1, and $75 million to improve Nepal's power transmission and distribution system. The Asian Development Bank has proposed to complement this effort by funding transmission, distribution, and rural electrification schemes. Norway, the United Nations Development Program, and Germany have addressed off-grid electrification by implementing microhydro projects.
Principal Contractors, Grantees, or Agencies: the Ministry of Water Resources (Department of Electricity Development); International Resources Group, Ltd.; and the United States Energy Association (USEA).
FY 2002 Performance Table
Nepal: 367-004
Performance Measures:
Indicator FY97 (Actual) FY98 (Actual) FY99 (Actual) FY00 (Actual) FY00 (Plan) FY01 (Plan) FY02 (Plan) Indicator 1: Private sector projects progressing towards hydropower investments: feasibility study completed 2 3 7 8 4 5 NA Indicator 2: Private financial commitments for hydropower project development 238 278 303 319 400 475 NA Indicator 3: Private sector projects progressing towards hydropower investments: financial closure 2 2 3 6 4 5 NA Indicator 4: Public hearings for hydropower projects conducted with local stakeholders and NGOs 4 5 9 11 9 11 NA Indicator 5: Private sector projects progressing towards hydropower investments: survey licencse issued 2 5 17 46 5 6 NA Indicator 6: Environmental/Social Impact Assessments for hydropower proposals 2 3 3 6 5 6 NA Indicator Information:
Indicator Level (S) or (IR) Unit of Measure Source Indicator Description Indicator 1: IR Cumulative total number of projects which have passed important stages towards completion of a private hydropower project: feasibility study completed Electricity Development Department (EDD) feasibility study completed Indicator 2: IR Millions of U.S. Dollars Electricity Development Department (EDD) Cumulative total of U.S. dollars (millions) in financial commitments by private financing institutions for development of hydropower projects. Indicator 3: IR Cumulative total number of projects which have passed important stages towards completion of a private hydropower project: financial closure Electricity Development Department (EDD) financial closure Indicator 4: IR Number of Hearings Electricity Development Department (EDD) Cumulative number of public hearings held by private sector hydropower companies. Indicator 5: IR Cumulative total number of projects which have passed important stages towards completion of a private hydropower project: survey licencse issued Electricity Development Department (EDD) survey license issued Indicator 6: IR Number of Environmental/Social Impact Assessments Electricity Development Department (EDD) Cumulative number of Environmental/Social Impact Assessments approved by Ministry of Water Resources in accordance with GON regulations. U.S. Financing
(In thousands of dollars)
Obligations Expenditures Unliquidated Through September 30, 1999 2,100 DA 779 DA 1,321 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 0 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA Fiscal Year 2000 1,115 DA 1,079 DA 0 CSD 0 CSD 0 ESF 0 ESF 0 SEED 0 SEED 0 FSA 0 FSA 0 DFA 0 DFA Through September 30, 2000 3,215 DA 1,858 DA 1,357 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 0 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA Prior Year Unobligated Funds 0 DA 0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Planned Fiscal Year 2001 NOA 185 DA 0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Total Planned Fiscal Year 2001 185 DA 0 CSD 0 ESF 0 SEED 0 FSA 0 DFA Future Obligations Est. Total Cost Proposed Fiscal Year 2002 NOA 0 DA 0 DA 3,400 DA 0 CSD 0 CSD 0 CSD 0 ESF 0 ESF 0 ESF 0 SEED 0 SEED 0 SEED 0 FSA 0 FSA 0 FSA 0 DFA 0 DFA 0 DFA
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Last Updated on: May 29, 2002 |
