Khani Khola Hydropower Company Limited

1. PROJECT DESCRIPTION

The Tungun-Thosne and Khani Khola Hydropower Projects are located about 25 km from the Ring Road of Kathmandu and are easily accessible via Tikabhairavand KantiLokpath. Access road from Chhapeli at KantiLokpath near Bhattedanda to Tungun-Thosne and Khani Khola powerhouses have been completed by PEDC with local support. Similarly a 2.5 km access road from Bhattedanda to Thosne Khola, recently completed by the local community with financial assistance from PEDC provides easy access to the headworks of Thosne and Tungun Khola.

The project is a cascade project where the water of Tungun River is diverted to Thosne River after which the first stage generation of 4.360 MW is achieved. The tailrace water from the first stage generation yields the generation of 2 MW (Khani Khola Hydropower Project). Hence the total installed capacity of the two projects is 6.43 MW. The annual energy saleable by generation from the two projects is 32.27 GWh.

The power evacuation to NEA was initially intended to be made at the switchyard at Kulekhani – 1 through a 33 kV transmission line of 19 km length. Connection Agreement in the regards was signed on February 2010. However signing of the PPA with NEA was not done in view of the low PPA rate available then from NEA and the high interest rate of loans from commercial banks.

In the meanwhile, Laxmi Cement Udhyog Ltd. is being initiated in the project area for the project and NEA is constructing a 33 kV transmission line between Matatirtha and Malta. Land for substation in Malta has been provided by Laxmi Cement to NEA. NEA has already appointed a Bangladesh contractor for construction of the 33 kV substation at Malta This has provided PEDC a good opportunity to interconnect at Malta which is only 1.45 km away from the Khani Khola powerhouse. Interconnection agreement was signed by the Proponent with NEA for interconnection at the NEA Malta substation on 23 March 2012. The PPA between NEA and PEDC was signed on 20 July 2012.

With the signature of the PPA the road became open for undertaking all measures required for financial closure and acquisition of generation licenses for the projects.

For implementation of the projects Pashupati Energy Development Company (P.) Ltd. (PEDC) adopted measures of creating a SPV (Special Purpose Vehicle) with majority share of 51% retained by PEDC, with two other equity partners each subscribing 19.5% shares and allotting 10% of the shares for investments from local community. The new company was initially registered as Khani Khola Hydropower Company (P) Ltd. But since Prabhu Finance Company Ltd. wished to become the second equity partner the company was converted into a public limited company. The loan components for the projects are to be acquired from a Consortium of commercial banks headed by Grand Bank Nepal Ltd with Citizens Bank International Ltd. and Civil Bank Ltd. as consortium partners.

In order to ensure completion of the project within the stated RCOD the civil works contracts have been arranged so that they are small packages which can be completed within one year.

The RCOD of the project was fixed on 13 April 2015 and the project schedule had been designed with this target date in mind. But the earthquake that struck Nepal repeatedly after April brought the project to a standstill for almost two months delaying the RCOD. Subsequent to the earthquakes the nation came under the grip of Madhesi uprisings and undeclared trade embargo across the Indo-Nepal border making it impossible to purchase petroleum fuels and construction materials. Hence project activities came to a virtual halt , The festive season of Dasai, Tihar and Chhat also made it difficult to mobilize labour for the projects. After the Chhat festival the project management has decided to acquire petroleum fuels and construction materials on its own from the Indo-Nepal border so that these may be passed on to the contractors to resume construction works.

With the intervention of the company on matters related to direct procurement of fuels and construction materials for the contractors most of the contracts are now either completed or nearing completion. Two of the contracts which are badly managed have been taken over by the company in contract management to ensure speedy completion of works.

The major bottleneck in the final completion of the project has been the failure of NEA to complete the construction of the 33 kV transmission line from Matatirtha to Malta despite the its obligation as per the PPA signed for the two projects. As a result the company has been compelled to accept the temporary arrangement of evacuation the power generated by the two projects into the local 11 kV supply system through the Malta substation. NEA for the purpose has to make improvements in the existing south Lalitpur feeders. The company has been requested to bear the labour costs for these improvements with the necessary hardware and cable being supplied by NEA. The completion of these improvements is imminent and the projects are in a position to declare their CODs very soon.

As NEA has not been able to implement the 33 kV transmission line between Matatirtha and Malta, an agreement has been reached whereby a contingency plan will be implemented whereby the energy generated by the projects will be temporarily evacuated into two local 11 kV circuits – viz South lalitpur feeder and Pharping feeder.

This progress report highlights the chronology of activities at different stages in the development of the projects and provides the updated status of the two projects.

2. SURVEY LICENSE

2.1 Issued to PEDC by DoED for Tungun – Thosne Hydropower Project as 4.360 MW and Khani Khola Hydropower Project 2 MW on 16/03/2008
2.2 Survey license validity extended and currently valid till 27/11/2068 (10 March 2012)
2.3 Application for extension of validities of survey licenses made to DoED on 5 March 2012
2.4 Extension of survey licenses received from MOE on 2069/1/26 with validity extended to 2069/11/27

3. FEASIBILITY STUDY REPORT

3.1 Inception Report prepared on 4/10/2008
3.2 Draft Feasibility Study Report prepared on 07/12/2008
3.3 Final Feasibility Study Report prepared on 25/01/2009

4. CONNECTION AGREEMENT/ PPA

4.1 Application to NEA for PPA made on 01/02/2009
4.2 Connection Agreement signed between NEA Grid Dept and PEDC on 21 February 2010 for evacuating the power of Tungun-Thosne and Khani Khola Projects to Kulekhani switchyard at KL-1 in Makwanpur District.
4.3 Application for change of project interconnection from Kulekhani to Malta submitted to NEA on 01/03/2068
4.4 NEA Project Development & Technical Services Dept writes to Power Trade Dept letter confirming that the 33 kV transmission line between Matatirtha and Malta is being tendered and that the line will be completed by 2 years. This provides NEA/PTD to change interconnection of PEDC projects to Malta instead of Kulekhani– 1.
4.5 Connection agreement signed on 23 March 2012 between Proponent and NEA for change of interconnection to the 33 kV sub-station being constructed by NEA in Malta in the vicinity of the Project with a transmission distance of only 1.5 km.
4.6 Finalization of energy tables and Project Salient Features made on 2068-12-29 (11 April 2012).
4.7 Draft PPA documents initialed by NEA & PEDC representatives on 20 April 2012.
4.8 PPAs signed on 20 July 2012 with 13 April 2015 as the RCOD.
4.9 PPA ownership transfer from PEDC to Khani Khola Hydropower Company Ltd. on 2070/3/12.
4.10 In view of the inability of NEA to construct the 33 kV transmission line from Matatirtha to Malta, the Coordination Committee has decided that a contingency feeders, i.e. South Lalitpur feeder and Pharping feeder.

5. INITIAL ENVIRONMENT EXAMINATION (IEE)

5.1 TOR approval for both Tungun - Thosne and Khani Khola Hydropower Projects by MOWR on 2065/11/18.
5.2 Draft IEE Report submitted to DoED on 2065/2/22 (5 June 2009).
5.3 Draft IEE Reports forwarded by DoED with comments to MoWR on 2065/4/8.
5.4 Comments on draft IEE Report by MoWR issued to PEDC on 2065/5/9 (25 August 2009).
5.5 IEE Reports approved by Ministry Of Energy on 2066/12/6 (19 March 2010).

6. DETAILED ENGINEERING OF PROJECTS

6.1 Draft Detailed Engineering Reports for Tungun-Thosne and Khani Khola Hydropower Projects completed on 31 August 2009.
6.2 Draft Bidding Documents completed on 31 October 2009.
6.3 Draft Consolidated Financial Evaluation Report completed on 31 November 2009
6.4 Updated DPR with interconnection at Malta sub-station of NEA finalized on 25 April 2012.
6.5 Updated Bid documents finalized on 25 April 2012.

7. GENERATION LICENSE

7.1 Application for generation license made by PEDC to DoED on 17/05/2069 (02/09/2012).
7.2 Application for registration of Khani Khola Hydropower Company (P) Ltd. as with Pashupati Energy Development Company (P) Ltd. and Baidik Hydropower Investment Company (P) Ltd. as promoters of the SPV for implementation of the projects submitted to Company Registrar’s Office On 10/06/2069 (26/09/2012) Registration of new company finalized on 3 October 2012 with registration No 106404/069/70 dated 2069/06/17 (03/10/2012).
7.3 PAN registration of Khani Khola Hydropower Company (P) Ltd. finalized with Pan No 60084466 on 29/06/2069 (15/10/2012).
7.4 Applications for registration of the two projects in Dept Of Industry submitted on 15/07/2069 (31/10/2012)Registration of the projects finalized on 21/08/2069 (06/12/2012) and 24/08/2069 (09/12/2012) with registration Nos. 1760/164/06970 for Tungun - Thosne Hydropower Project and 1763/167/069/70 for Khani Khola Hydropower Project.
7.5 Correction of project coordinates approved by DoED on 10/05/2069 (26/08/2012).
7.6 Public notices for the implementation of the two projects approved by DoED and published in a local newspaper on 13/09/2069 (28/12/2012) and 14/09/2069 (29/12/2012).
7.7 Acquired Generation License on 3 Falgun 2069 (14 February 2013) from Department of Electricity Development.
7.8 Generation Licenses transferred from ownership of PEDC to KKHPCL on 2069/12/15.