The Ministry of Energy (MoE) has expedited work on finalising a draft of the power development agreement (PDA).

“Work related to drafting the PDA is almost at the final stage,” said Energy Secretary Hari Ram Koirala. He added that the draft would be ready by Saturday and then forward it to the Investment Board on Sunday.

The ministry said that the draft would be sent to the board so that it can make preparations to sign PDAs with hydropower companies  who are waiting for PDA for the last three years.

The MoE has been conducting a workshop to finalise the format of the PDA in Dhulikhel from Wednesday. Representatives from the Ministry of Finance, Nepal Electricity Authority (NEA) and the Department of Electricity Development (DoED) are participating in the workshop to give their input.

Two months ago, the ministry had prepared a draft of the PDA and sent it to the concerned authorities including the Finance, Law and Environment ministries, among others. “We will be incorporating the views of the ministries in the draft. We want the text to be perfect so that there will be no confusion or difficulty in the future,” said Koirala.

Delays in preparing the text of the agreement have been preventing the government from concluding a deal with the power developers so far. The delay has prevented developers from going into the construction phase.

Investors seek a government assurance through the PDA that helps avert any possible social, economic or policy-level uncertainties during construction. Generally, issues related to taxes, licence period, free energy, royalty, repatriation right and parties’ obligations are included in the PDA. After the PDA is approved, the DoED will issue generation licences to the projects.

He added that once the PDA was ready, the ministry would call interested investors among the eligible ones to sign the agreement. Meanwhile, the Investment Board will simultaneously negotiate with the five hydro power projects with which it has been assigned to conclude PDAs.

On May 25, Prime Minister Baburam Bhattarai had asked the board to develop five mega hydro projects including the 650 MW West Seti, 900 MW Upper Karnali, 600 MW Upper Marsyangdi, 900 MW Arun III and 880 MW Tama Koshi III in line with the IB Act that states that any hydro power project with a capacity of more than 500 MW will come under the purview of the board.

Apart from these projects, delays in finalising the text of the PDA has also prevented three other hydropower projects — Lower Arun (400 MW), Balefi (450 MW) and Likhu (120 MW) — from entering the construction phase.

“Once the IB gets the text of the PDA, we will begin negotiations with the five hydro power projects that the government has entrusted us to develop,” said IB CEO Radhesh Pant.

On April 21, Prime Minister Bhattarai had directed the MoE to give the work of drafting the PDA to the Investment Board as it had been slow in doing the job. As the PDA being drafted by MoE is for export oriented-projects, the board has also been working on PDA for projects which will be developed for local consumption including West Seti Hydropower Project.

“Once the PDA is completed, the board will call China Three Gorges International to sign an agreement for West Seti,” added Pant. The board has been negotiating with the Chinese corporation, and sources said that it was eager to invest in Nepal.

The board recently submitted a detailed work plan on West Seti to the government. The board will be in a position for PDA negotiation with China Three Gorges by October, Pant said.

The PDA signing process with seven hydro projects were initially postponed in September 2010 after the UCPN (Maoist) asked the government to shelve projects being developed by Indian developers. A power tussle between the then energy minister Prakash Sharan Mahat and energy secretary Shankar Koirala further delayed the process.