Nepali Times
"Misleading and inaccurate"

We have recently been presented with, a copy of the article by Navin Singh Khadka entitled 'The price we pay for power' which was published in the Nepali Times (#142). We find the article to be misleading and inaccurate and would like the opportunity to provide additional information which would allow your readership to clearly understand the issues that have been raised.

In the mid 1990s, international sponsors in conjunction with the government of Nepal, mutually identified a need for electricity generation and a hydroelectric power project in the Upper Bhote Koshi area of Nepal. In 1996, the sponsors including Panda Energy International, Inc (Panda) formed Bhote Koshi Power Company Pvt Ltd (BKPC) to complete development of the project. Based upon lengthy studies and negotiations with international lenders, the NEA and international contractors, BKPC successfully obtained the commitment for the financing and the construction of the Upper Bhote Koshi Power Facility, a cost-effective, clean, environmentally sound, hydroelectric generating facility.

The ability to obtain the necessary financing for the project was predicated entirely upon the economics established under the Power Purchase Agreement (PPA) with NBA. Without the obligation of NEA, guaranteed by His Majesty's Government of Nepal (HMGN), to purchase power from the project at the negotiated rates, the project would not have, been built. Based upon the promises and the obligations of NEA contained in the PPA, BKPC raised the funds from a consortium of international lenders including International Finance Corp of the World Bank and DEG of Germany. BKPC constructed the project from 1997 to 2000 and has managed and operated the facility since it began commercial operation in January 2001.

Tantamount to any lender's ability to loan money for international construction is the sanctity of the contract in the host country. International lenders will not find projects in jurisdictions where the contracts upon which a financing is based, are not honoured. Unfortunately, NEA has not honored the terms and provisions of the PPA by withholding payments for energy produced and delivered under that contract. Since the commercial operation of the facility, BKPC has not requested payment for power in excess of the 36MW as otherwise alleged in the article. BKPC has and will continue to honour all of its obligations under the contracts signed with NEA and HMGN.

BKPC and the lenders to the facility also expect the authorities in Nepal to honour their commitments under the contracts signed with BKPC. The unnamed senior NEA official in the article has mistated that BKPC has been asking for payment for extra power generated by the project. This is false. BKPC has never requested payment for energy in excess of the 36MW amount allowed by the contract. The unnamed senior NEA official is clearly uninformed or for reasons of his own, deliberately misleading your readers. More over, BKPC has made numerous attempts to correct, in an amicable manner, the outstanding payment issues with NEA. To date BKPC has not been successful.

The article is also misleading in its comparison of the tariff which NEA pays to the Butwal Power Company verses that which NBA pays to BKPC. The method of financing and nature of development of the projects operated by the two companies are entirely different, and hence any comparison of their tariffs is unjustified and improper.

The investors in BKPC, including Panda, do have a strong relationship with various members of the United States Congress and with the Executive Branch of the United States Government. It is our hope that the issues with NEA can be resolved and that in the future BKPC and Panda can use these relationships to further support and participate in efforts to increase international business investment and other opportunities for Nepal.

Finally, the Upper Bhote Koshi Hydroelectric Project has contributed millions of dollars in taxes, royalties, construction costs, employee salaries, and community that directly benefit the people of Nepal and will continue to make a significant contribution to the people of Nepal during its useful life.

BKPC believes that it is in the best interest of the people of Nepal that both BKPC and NEA live up to their respective obligations under the PPA. BKPC has fulfilled its end of the bargain by obtaining financing, constructing and operating the facility, all as required under the PPA. It is now time for NEA to perform its side of the bargain. The failure of NEA to fulfill its obligations under the PPA go far beyond BKPC and the facility, as the fixture willingness of international investors and lenders to make significant commitments to Nepal may be adversely affected. That result is not desirable for NEA, the people of Nepal, nor BKPC.

Todd W Carter,
President, Panda Energy International, Inc

(11 JAN 2013 - 17 JAN 2013)