Transcript Document

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
• 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
2
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!!!
3
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
4
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
5
Risks
• Risks for hydropower project development (contd.):
– Regulatory Risks
– Power Evacuation Risk
• Congestion
• ROW
–
–
–
–
Labor Laws
Environmental Risk
Social Risk
Reputational Risk
6
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
7
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
8
Thank you!
November 17, 2006
10