Govt, WB restructure Fund

PDF fails to attract hydro projects

BY THIRA L BHUSAL
KATHMANDU, July 19

Following its lackluster performance, the Government of Nepal and World Bank (WB) have restructured the Power Development Fund (PDF).

PDF will no longer exclusively invest in small and medium power projects as it was initially supposed to do. The Fund is currently studying areas in which it can most effectively invest to promote hydropower development.

The government and WB established PDF in 2003 July 9 with the objective of financing small and medium sized hydropower projects. The WB committed an initial amount of US Dollar 35 million for the Fund, which is wholly owned and operated by the PDF Board.

But PDF completely failed to attract small-sized hydro projects. Ridi Hydropower Development Company Limited (Ridi Hydro), the only small-sized project that sought support from PDF, recently withdrew its application.

The 2400 KW Ridi Hydro has instead opted for financing through a commercial bank.
"The PDF has a cumbersome loan accessing process and is not business friendly," Guru Prasad Neupane, Executive Director of Ridi Hydro, told the Post, explaining why it withdrew its application from the Fund.

Neupane also claimed that appointing Nepal Bangladesh Bank Limited (NBBL) as PDF Administrator has only added more hassles. "NBBL has been creating complications instead of facilitating promoters," he charged. Neupane also claimed that the WB procurement guideline is not suitable for Nepali investors. "That needs to be changed as per the Nepali context," he added.

However, Susmita Sharma, official at NBBL who looks after PDF, claimed that Ridi Hydro quit the process despite the fact that the PDF Board and WB tried their best to support the project.
The Ridi episode forced the PDF Board to restructure the Fund. Director General of Department of Electricity Development (DoED) Sriranjan Lacoul, who is also Chairman of the PDF board, said the government and the WB restructured the PDF in view of the changed context.

"When the PDF was established, the banking sector was too weak to invest in the hydropower sector but now they have enough liquidity," said Lacoul.

The board has now decided to select bigger projects. "Our role will be to create favorable environment for investors and encourage them," Lacoul said. "For that we will identify problems faced by investors and try to solve them," he clarified. The Fund may also support constructing transmission lines if that's obstructing any hydropower project.

However, the board is yet to select and finalize the areas and projects on which it will work and the money the Fund will spend. "We will finalize the areas and projects within a few months," Lacoul informed.

THE KATHMANDU POST