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Experiences in Hydropower Development in Nepal

An International Perspective

Einar StenstadvoldExecutive Vice President Asia, SN Power

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SN Power is placed in the intersection of two global megatrends

Growth in emerging markets

Demand for renewable energy

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Mission

”To become a leading hydropower company in emerging markets, contributing to economic growth and sustainable development”

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Business objectives and strategy

Established in June 2002 -Jointly owned by Statkraft (50%) and Norfund (50%)

Business objective: To invest in clean, renewable energy projects on commercial basis in selected emerging markets

Long-term investment strategy

Capitalizes on its owners’ technical and financial strength and international hydropower experience

Transfer of Norwegian hydropower expertise

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SN Power presenceEstablished in Asia and Latin America

IndiaNepalSri LankaBhutan

PeruChile Brazil

Philippines VietnamLaos

MozambiqueZambia

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Portfolio & ambition

Operating plants 636 2575

Construction 272 1086

Total 908 3666

Pipeline 1800 8000

Net Portfolio 2008 (equity) MW GWh

5X

Ambition 2015

4000 MW

15 - 20 TWh

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Himal Power Limited (HPL) Experience

The overall experience has been good

Profitable project Good and stable hydrology

High plant availability

There have been challenges Silt and operational conditions

Legal and political instability

Security situation

Local community development crucial to success

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Project Development Situation

Opportunities

Many physically good projects in Nepal

Strong long-term market possibilities

International companies interested to invest in Nepal

Requires strong international hydropower and peaking power experience to develop the potential in the long run

Challenges

Long term political stability

Financing: FDI/ Country rating risk

Ineffective “one window policy”

Two-step (survey and generation) licensing procedures

Time consuming Environmental Impact Assessment process

Future challenge: Division of resources in Federal Nepal

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Project Development & Licensing Situation

Project Development

Sanctity of Contracts – not honored

Weak Implementation of Policies, Acts and Regulations

Inconsistency among various line ministries

Licensing

Licenses not awarded in stipulated time

Real developers not incentivized

Trading in licenses is in vogue

Royalty and Tax level not competitive in the region

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Human and Institutional Resources Situation

Positive:

Hydropower: a national priority

Low cost level

Good quality hydropower institutions

Challenges:

Investment-unfriendly labor laws

Frequent labor disputes

Shortage of qualified hydropower, legal and finance professionals at all levels

Limited manufacturing and construction capacity

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Conclusions

Our portfolio in Khimti River Basin can be increased to about 150 MW

Development of 640 MW Tamakoshi 2&3 has begun, with construction to start in 2010-2011

We are looking at other possibilities in Nepal

We believe in integrated river basin development for:

• Operational efficiency

• Optimum utilization of water resources

• Optimum utilization of Logistic and resources

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Conclusions

Nepal is an emerging economy coming out of a very difficult and unstable political situation

SN Power (through HPL) has lived with Nepal through the insurgency and wants to live with Nepal into a brighter future

SN Power believes in Nepal and is already taking part in the 10,000 MW Vision

Many challenges ahead in meeting this Vision

SN Power ready to work with the Government of Nepal to overcome these challenges and to contribute to the Vision