CHILIME HYDROPOWER : A Role Model for Utilising Domestic Resources to Develop Power Projects

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 CHILIME HYDROPOWER : A Role Model for Utilising Domestic Resources to Develop Power Projects

Chilime Hydropower Company is considered to be a leading company in the energy sector in Nepal.

With a 51 percent stake, Nepal Electricity Authority (NEA) has majority ownership in Chilime. Similarly, NEA and Chilime employees own 25.5 percent shares of the company while the general public holds 14 percent shares. The remaining 10.5 percent shares are owned by the locals of Rasuwa district where the project lies. Chilime Hydropower Company Ltd has also helped establish the hydropower sector as an investment avenue for the general public.

The floating of shares to the locals of project affected areas has not only made thousands of locals in Rasuwa the owners of the hydropower company but also introduced the concept that locals can also receive the benefits of hydropower projects as owners.

Chilime Hydropower Company is also known as a company that can give attractive dividends to its shareholders. The company distributed a 10 percent dividend in the first year the project came into operation. Since then, it has been offering returns to its shareholders almost every year.  The hydropower company had offered 75 percent dividends in the Fiscal Year 2010/11. Such a return was 25 percent in the fiscal year 2018/19.

Chilime Hydropower Company Ltd was conceived with the objective to utilise domestic technicians, contractors and banking institutions and to develop the hydropower sector. It was expected that developing hydropower projects by utilising domestic technicians, workers and contractors, among other things, would be cheaper and lower electricity tariffs for consumers in the market. Chilime Hydropower Project built its 22-MW hydropower project in Chilime River in 2003 at a cost of Rs 2.5 billion. This project, which has been connected to the national grid via a 38km 66 KV transmission line, aims to generate approximately 133 million units of electricity annually.

Following the success of Chilime Hydropower Project, the company started four other projects with a combined capacity of 300 MW. Some of these projects are expected to generate electricity from the current fiscal year while others have a production target for the next fiscal year. Similarly, the company is also looking into developing three other projects with a combined capacity of 650 MW.

Chilime Hydropower Company was the first subsidiary that NEA set up to develop and operate hydropower projects. Following the success of its Chilime Hydropower Company model, NEA has formed other subsidiaries to develop hydropower projects.

Rather than building hydropower projects on its own, NEA has found the subsidiary model to be more effective and successful. NEA officials say that the state power utility’s subsidiaries have become successful because they are run by professional directors appointed by the NEA, whereas, in other cases, there is a risk of political appointments or projects being managed by directors appointed from other ministries.

Upper Tamakoshi (456 MW) and Tanahu (140 MW) are some of the big projects that NEA is building through its subsidiaries.

One of the factors that determine the success of any hydropower project is the price of which it can sell the electricity. Chilime Hydropower Company is receiving Rs 8 per unit on average for the electricity that it sells to the NEA. This is the highest rate that the NEA has provided to any hydropower project.

Many small hydropower projects are compelled to sell their electricity at as low as Rs 4 per unit to the NEA. Some of the projects that are selling electricity to NEA at lower rates are Upper Tamakoshi and Trishuli 3 ‘A’. This has reduced their profit margin making them unable to distribute the same level of dividends as Chilime Hydropower.

NEA has to own up to the discrimination that it has perpetuated between Chilime Hydropower Project and other small hydropower projects when it comes to the electricity purchase rates. However, the success of this project could also inspire other developers. Less than 15 years after building a 22-MW hydropower project, it is operating other projects with a combined capacity of 300 MW.
Building new projects not only helps to mobilise domestic capital and resources, but it also enables Nepali investors, banking institutions and customers to reap maximum benefits from the development of the hydropower sector.

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