Kathmandu, Oct. 17: The private sector has, for the first time, been given a formal assent to prepare for cross-border electricity trade in Nepal.
Minister for Energy, Water Resources and Irrigation Biraj Bhakta Shrestha on Friday decided to issue Letter of Intent (LOI) granting in-principle consent to private companies to prepare for cross-border electricity trading, opening the way for them to explore markets and engage in electricity trade.
The ministerial-level decision is being viewed as an important step towards expansion private investment and bringing structural reforms to Nepal’s energy sector.
It allows the private sector, which has so far been largely confined to electricity generation, to explore electricity markets, identify potential domestic and foreign partners, and prepare the necessary agreements for electricity purchase and sale, according to the Ministry.
The decision opens up new business opportunities for private companies, which have long been demanding permission to participate in cross-border electricity trade. Although private companies have been allowed to develop hydropower projects and generate electricity, a clear pathway for their direct participation in cross-border electricity trading had not been established.
Under the new arrangement, companies meeting the conditions prescribed by the government will be able to conduct feasibility studies, identify potential markets, hold discussions with prospective partners and prepare agreements on the basis of the letters of intent.
The letters of intent will provide in-principle consent for companies to undertake the necessary preparations before formally commencing cross-border electricity trading, said the Ministry.
Companies receiving the letters will be permitted to conduct technical, financial and commercial feasibility studies in accordance with prevailing laws, identify potential trading partners, hold necessary discussions and coordination meetings, and prepare agreements.
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