RE: My article on माथिल्लो कर्णाली आयोजनाको बिरोध - कति जायज ?

February 10, 2010

Hitendra Dev Shakya

Nepal Electricity Authority

Dear Hitendrajee

I am proud to have been your teacher some time back. You have clearly enunciated what I couldn’t do in my article due to “space” constraint. Only concern is: the GoN isn’t clued in to what you have envisaged and the paper work has already made it a dedicated export oriented project for 264 MW. In this backdrop PTC will not be agreeable to sign a PPA with “Right of First Refusal" with Nepal as a covenant. They want power not just energy.

But the larger concern is related to the fact that developing it as 300 MW project is mutually exclusive with 4,180 MW project; entailing very high opportunity cost to Nepal.

I am glad that you have joined this electronic interaction. An interaction program is being organized on this very topic on Friday at Rashtriya Nach Ghar where I will be making my presentation. I invite you to participate.

With best regards,

Sincerely,

Ratna Sansar Shrestha

From: Hitendra Dev Shakya [mailto:hitendradev@hotmail.com]
Sent: Tuesday, February 9, 2010 23:49
To: ratna sansar shresthaCc: lbshilpakar shilpakar silpakar dr; tara pradhan; balendra chettry; asta ratna shakya; ranjan vaidya - Durgapur- AUS; soory9@yahoo.com; pushpa chitrakar

Subject: RE: My article on माथिल्लो कर्णाली आयोजनाको बिरोध - कति जायज ?
Dear Sir,

No doubt, opposing all deals of Energy-export projects that seem to cheat or short-change national interest is the right thing to do.

But what is the SOLUTION?
and the solution should be simple.

Although it is believed Legal Eagles Love Complexity, I believe that "Simplicity is the Secret of Genius"
So I for one always look for a solution which is as simple as can be.
Sir , here is what I suggest ( and I have already proposed this long ago also)

For all such export-oriented projects, to avoid such fear of getting tricked in future by some deal now,we can easily insist on the provision - " Right of First Refusal" which is quite common and acceptable legal clause in business.

It means, Nepal shall have first Right of refusal to Purchase the power produced from Nepalese rivers.THis one clause should ensure that 'nobody can short-change us in Royalty nor cheap electricity'.

At the same time, it does not deprive of certainty of Revenue to the Developer, and also let them have a PPA with whomsoever they want, so that they can make a financial closure.

And to be fair, this clause should be applicable after some time depending upon size of project - to allow for recovery of investment cost and specially the sunk cost on Transmission. For example
1. For <10MW, after 3 years;
2. For > 10 and <100 , after 5 years;
3. For >100 and <500, after 7 years;
4. For >500 and <1000, after 10 years and etc.

First right of refusal after above "free period".
So if we think we can get a better price, we can buy from the said projects and use it ourselves or sell it in Indian market, if we are allowed, if not, we know who to blame.

I am sorry if I am out-of-touch with the issues but,
I see it plain and simple unless there is a need to keep it complex.

I admit I am a Simpleton.

With best Regards

Hitendra D Shakya