March 11: Nepal Electricity Authority (NEA) and Himal Power Company, the promoter of the 60-Megawatt Khimti Hydropower Project, have decided to continue operation of the project as per an interim agreement until mid-August after the two sides could not reach an understanding regarding the handover of the project to the government within the previous deadline.

The two sides had earlier reached a short-term understanding to continue operating the project although the share transfer process could not take place. The previous agreement expired in mid-February.

Executive Director of NEA Hitendra Dev Shakya confirmed that the interim agreement has been extended until mid-August. The interim agreement has a provision under which NEA will be allowed to purchase power from the company at Rs 2 per unit although the Power Purchase Agreement (PPA) with the company expired during last July.

This is the first hydropower company that is about to be handed over to the government by the private sector.

As per the agreement between the Government of Nepal and the promoter company, 50 percent shares of the company should have been transferred to the government by July 11 last year. However, the deadline was extended till mid-February and again till mid-August as the share transfer process could not be completed within the stipulated date.

The project which is being run by Himal Power Company since July 2000 is the first hydropower project built with investment from the private sector.

The then government had signed an agreement with the developers to transfer 50 percent of shares to the government after 20 years of operation. The project reached the milestone of generating electricity for 20 years on July 11 last year.

As per the agreement, the NEA will own 100 percent shares of the project in the next 30 years.

For the completion of share transfer process, stakeholders including the NEA and the promoters of the project should establish a joint venture. Then the new entity will have to finalize the Power Purchasing Agreement (PPA) with the NEA. However, the joint venture company is yet to be established and the issue of PPA is also pending.