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Power Summit 2008 Kathmandu, Nepal September 24th 2008

Risks for Investment in Hydropower Sector in Nepal; Developers’ Perspective. Power Summit 2008 Kathmandu, Nepal September 24th 2008. Presented by: Dr. Sandip Shah IPPAN. Benefits of Private Development. Precious, new money to country Technology transfer Promotes local industry

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Power Summit 2008 Kathmandu, Nepal September 24th 2008

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  1. Risks for Investment in Hydropower Sector in Nepal; Developers’ Perspective Power Summit 2008 Kathmandu, Nepal September 24th 2008 Presented by: Dr. Sandip Shah IPPAN

  2. Benefits of Private Development • Precious, new money to country • Technology transfer • Promotes local industry • Provides opportunity for small and large contractors to gain knowledge and earn money • Taxes, royalties and revenue to GoN & local governing bodies • Funds for community projects – CSR • Demonstration of environmentally and socially responsible development • Employment and training for technical staff • Reducing burden on GoN • More efficient form of development process • Support to economy at micro, macro and national level

  3. Barriers to Investment • Lack of Political Stability • Policy Stability • Legal and Regulatory Framework • Geopolitics of Region • Security – physical & investment • Institutional Setup • “Single-Window” Policy • Market for generated power • Power Evacuation • Contractual/Commercial Aspects • Level Playing field for IPPs • Financing • Payment Guarantees • Merchant Supply Nepal is still not on the investment map of the World!!!

  4. Risks • Risks for hydropower project development in Nepal: • Technical Risks: • Hydrological • Geological & Geotechnical • Floods • GLOF • Construction Risks: • Delays • Strikes • Flooding • Operational Risks: • Equipment • Sediment • River Flows

  5. Risks • Risks for hydropower project development (contd.): • Contract Performance Risks: • Country Risk • Political Risk -CEN • Policy Risk • Legal & Regulatory framework • Sanctity of Contracts • Security of Site & Investment • Payment Risk • Credibility of buyer • Payment guarantees • Foreign Exchange Risk • Currency Conversion & Repatriation

  6. Risks • Risks for hydropower project development (contd.): • Regulatory Risks • Power Evacuation Risk • Congestion • ROW • Labor Laws • Environmental Risk • Social Risk • Reputational Risk

  7. Risk Assessment • For every risk, there is an associated Return!!! • Perception of Risk • Weightage to different risk elements • Management / Mitigation of Risks • Measures to alleviate the risk • Structural Improvements/ changes – increased reliability • Fire protection systems • Early Warning Systems • Emergency procedures • Security arrangements • Comprehensive CSR Program • Insure against the risk • Insurable risks • Non-insurable risks

  8. Necessary Conditions for Increased Investments • Power Sector Reforms is essential • Rationalize legal framework • Unambiguous, non-overlapping, non-discretionary • Institutional clarity • Proper incentives due respect • Strong, independent regulation • Credit Rating of Country and Off-taker(s) • “Single-Window” Policy more effective • Independent Market/System Operator • Open, Non-Discriminatory Access to Grid • Market-oriented Power Trading • Level Playing Field

  9. Thank you!

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