Concept Paper on YESS (Youths for Energy Sector and Society)

1. Background
1.1 How this concept started??
Nepal is a least developed country lying in South Asia. Despite having enough resources for
development, these have not been explored properly. The major resources are water forest,
land (, ) and manpower. Unstable political situation of our country and brain
drain are the major causes for difficulty in utilization of these resources in planned, sustainable
and collaborated way. The current situation of Nepal gave birth to the concept of youths
(manpower) coming forward for country.
Globally youths have started to emerge as important stakeholders in all aspects of society
including education, health, business, technology and research. Similarly Nepalese youths also
need to work together for welfare of society and nation through a dependable, transparent and
cross-sectoral platform. We focus on the same necessity of directing youth power towards
nation building by providing the right motivation and direction.
Nepal is currently facing huge energy crisis. We are facing power cuts in amounts that have
made life across the country hard and struggling. Despite having huge potential to develop
energy from Hydropower, Solar, Wind, Biomass fuel and even petroleum (currently undergoing
study), enough research and investment has not been made. To address this crisis, energetic
and positively motivated Nepalese youths across the world should be united and contribute for
the development of energy sector in Nepal. Currently in Nepal, there has been some investment
by public sector and none by youths in energy. Hence Public sector investment from youths
comes as an innovative idea to develop energy sector. We believe such an effort from youths
will also motivate others to come forward for energy development.
Looking currently at the possible sources of energy, hydropower seems to be the most feasible
and sustainable one. Hence, we are focusing more on hydropower currently but we want to
keep our minds open for more attractive energy alternatives that might come forward in the
near future.

1.2 History of Hydropower development

Nepal is rich in hydro resources, with one of the highest per capita hydropower potentials in the
world. The estimated theoretical power potential is approximately 83,000 1 MW. However, the
economically feasible potential has been evaluated at approximately 43,000 2 MW. First
hydropower plant established in Nepal was Pharping Hydropower which is also the first plant in
Asia (500 KW)3 in 1911. Although we have century old experience in hydropower development,
the growth of the sector is not as per the requirement.
1
2

Thesis Dr. Hariman Shrestha

Hydropower Development in Nepal - Nepal Rastra Bank

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Concept Paper on YESS (Youths for Energy Sector and Society)

The national demand is
growing
on
rapidly
as
compared to the national
production growth due to
which the country is facing
severe power cuts. At present,
the
total
hydropower
generation has reached 7403
MW or just 1 percent of our
potential. Of the total energy
consumption
in
Nepal,
traditional energy like fuelwood, agriculture residues and
Hydropower Development in Nepal
animal dung comprises 88
percent and commercial energy like petroleum, hydropower and solar energy constitutes 2
percent4. Hydropower accounts for 75 percent of total commercial energy supply in Nepal.
Hydropower plants have mainly catered to the electricity needs in urban and semi-urban areas.

1.3 Need of Electricity

National Planning Commission developed a national vision for Nepal in 2014 to graduate from
Least Developed Country to Developing country status by 20225 and set investment targets that
are needed in agricultural, industrial and service sectors to raise Nepali's income, life standards
and vulnerability. Further, NPC created three-year interim plans for the country as well as
identified the national priority projects.
Yet, so far delivery remains a problem for projects of national significance with most considered
to be underperforming and all of them face low rates of budget disbursement. In order to
graduate the country from under developed to developing, there needs to be adequate amount
of investments in infrastructures, especially in hydropower which would assure the sustainable
economic development of the country. The country now has been facing upto 16 hours of
power-cuts per day which in turn has increased the cost of production & has hampered socioeconomic development. The increased level of fuel consumption (Diesel, Petrol and Kerosene) is
another outcome of these power cuts and this has significantly increased our trade deficits.
3

Department of electricity Development, Generation licensee list

Hydropower Development in Nepal - Nepal Rastra Bank
5
National Planning Commission - Millennium Development goals.
4

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Concept Paper on YESS (Youths for Energy Sector and Society)

1.4 Why Hydropower Investment in Nepal
Nepal has hydropower potentiality of 83000 MW and out of which 42000 MW is technically
viable and till date we cannot utilise even 1% of its total potentiality. The demand of electricity
is rapidly increasing at the rate of 10-12%6 per year. The current demand of power is around
1300 MW and our production (Hydro+Diesel+Solar) is around 800MW. By 2020, even if all the
projects under construction complete in specified time, we would still have an energy crisis. The
Government has prioritised energy sector to overcome this power deficit. So, a huge potentiality
can be seen in hydropower project in Nepal. Currently the Government is trying to manage
shortfall through electricity purchase from India, which is a short term measure only. Hence
Hydropower is the best area to make investment in current scenario. Further, hydropower is
eco-friendly, has least installation and maintenance cost and is the most sustainable means of
electricity generation.
The commitment from Nepal Government (NG) also proves that this sector is the ideal sector for
making investment. Recently NG has signed Power Trade Agreement with India for further
development of electricity. Government of Bangladesh is also interested to purchase electricity
from Nepal.
NG has put this sector in top priority by announcing lots of facilities and concessions for
development of hydropower project. The Government has provided 10 year tax holiday from
date of Commercial operation and 50% concessional tax rate for next five years for Hydropower
projects in Nepal. Moreover, the custom is levied at only 1% on the machinery and equipment
that are imported for construction of Hydropower Project.

2. Proposed Plan
2.1 Mission & Vision
Vision:

To create positive vibes among all Nepalese across the globe that change is
possible

Mission:

To develop energy sector in Nepal from the funds collected from youth
investors as well as inspire youths to become responsible towards society,
nation building and economic growth

Mission Statement: Dream of Youths, Done for Nation

,
YESS Together We Can

Nepal Electricity Authority- Electricity Demand Forecast

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Concept Paper on YESS (Youths for Energy Sector and Society)

2.2 Organisational Structure
The proposed organisational structure shall comprise of a Not-for-Profit organisation at the top
level and Special Purpose Vehicle (SPV) for energy projects in the second level. The Not for Profit
Organisation which has been proposed shall operate funds from membership fees (limited
monthly membership fees not more than
NRs 100 per member) and donations with
Not For profit
Public Company 1(SPV)
the following objectives:
Organisatiion
(Proposed Name:
Public Company 2(SPV)
Continuous
Identification
of
Youths for Energy
Public Company 3(SPV)
energy sector projects (e.g. Sector and Society)
Hydropower) and analysis of
investment opportunities for the
same.
Conduction of social welfare works with the help of volunteers, members and supporters
Create awareness among youths for sustainable economic growth of the country
Gather a group of investors (youth focused limited investment strategy) for the
investment in energy sector projects
Launch various campaigns to focus on energy saving alternatives and reduce load to our
main electricity supply grid
Play an initiative role that would be a motivational factor for others to follow.
The objective of the SPV shall be as follows:
Development & operation of a hydropower project or any other project.
Youth based corporate governance in the organisation which would be a model.
Employment opportunity for talented youths
Setting a trustworthy platform for investors from inside the country or outside.

2.3 Proposed Financing Structure

Youths for Energy Sector and Society (Proposed) shall be formed as charitable organisation
whose operation will be completely based on the membership fees and donation. Initially the
organisation shall be formed with the minimum amount of contribution (not more than NRs 100
per person per month) from the members. It shall also organise the campaign for energy saving
either on its own cost or shall seek donor support in this regard. Further the Organisation shall
be fully focused on the identification of energy sector projects (especially hydropower) on its
own cost and after the project is identified, it is handed over to SPV. The SPV shall reimburse all
the related expenditure.
In case of SPV, it would be a public limited company registered for the operation of a concerned
project. The first SPV shall be small hydro power project not more than 10 MW HEP which
would be a model project with youth operation and management. The company shareholding
structure shall be such that No single promoter would be allowed to invest more than 2% of the
total share capital (i.e of the total equity amount). The tentative financing structure of the each
of the project shall be based as following.
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Concept Paper on YESS (Youths for Energy Sector and Society)

Project cost

70% Debt
Financing

30% Equity

51% promoter

49% public and

Local

2.4 Things to be considered for choosing Hydropower Project

The following parameters need to be considered while making investment in Hydropower
Project.
Access Road: The first parameter that needs to be considered is access road. Is
there road access to the project location? If not, how far is it from the highway?
How much road construction is necessary? How much does it cost?
Transmission line: Transmission line is necessary to connect the generated
electricity to the national grid. How far is the project from the load canter? The
longer the length, larger is the line loss and larger the cost of such line
construction. What is the capacity of the transmission line? Lower capacity
transmission lines lose more power than the higher which means 132 kV lines are
better than 33 kV or 66 kV lines. This is important because Nepal Electricity
Authority pays the project owner for the power.
Management team: Teams experiences both from hydropower and financial
fronts. Have they constructed any projects before? Are they capable of building
the project on time? An efficient experienced management team should be in
place for proper and timely project management.
Relationship with local people: This is another factor which needs to be
considered till the life of the project. Are local residents willing to participate in
building the project? Has company set certain percentage of investments
exclusively for locals? How is companys public relations? How much of the
private land has to be procured and what is its cost? Are there any residential
areas in the project areas? What are the social and environmental impacts of the
project and how is company planning to address them?

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Concept Paper on YESS (Youths for Energy Sector and Society)

Hydrology of the project: What is the head of the project? Tunnel alignment?
Geology/rock structure, nature of the river, catchment area, source of the river
What is the structure of the dam; length of the dam? How was water data
collected? Do they have historical data? Is it possible to compare companys data
with Nepals Department of Hydrology and Meteorology data?
Financial parameters of the project: The total cost of the project and annual
projected energy revenue. What is the rate of return? Payback period? Cost per
MW? Comparison with the similar size projects. Cost prediction cannot be
accurate, Is there any cost separated for contingency or inflation?

2.5 Steps for Hydropower Project Development in Nepal

Flow chart below gives a brief overview on the hydropower development process.
Survey License from DOED
(5 Years)

Feasibility
Study

Grid Connection Agreement

Power Purchase
Agreement with
NEA (2 Years)

Detailed Project
Report

Obtain Generating Licence

Management Plans,
construction and call tenders

Financial Closure

Construction Period
(3-5 Years)

Commercial Operation Date

Fig: Hydropower Project Development Process (Based on Electricity Acts & DoED Guidelines)
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Concept Paper on YESS (Youths for Energy Sector and Society)

Step 1: Survey license (5 years) conduct feasibility study and sign power purchasing
agreement (PPA).
To conduct feasibility study (Geological, hydrological, drilling, environmental, and
social)
Company pays annual fee/tax. The amount depends on the size of the project.
After the completion of feasibility study, the company starts the detailed project
report (DPR).
Towards the end of survey license period, company plans to have power
purchasing agreement with NEA
There are set of procedures to be completed before PPA agreement is signed.
Grid connection agreement to decide which load canter to connect
Energy lock: finalize the amount of energy that NEA will buy during each month
Price of electricity: The price of electricity for plants with nameplate capacity of
more than 25 MW, the price is negotiated and is based on the cost structure and
will not be lower than the posted rate.
Step 2: Obtain generation license (valid for 35 years)
Step 3: Financial closure (duration: 2 years after PPA)
In order to get the loan for the project, the company has to convince lending
agency with the feasibility of the project.
At the same time, the company also collects equity. Usually the Debt-Equity ratio
is 70:30; that is the source of 70% of the total costs is loan and other 30% comes
from equity. The company can also collect equity through issuance of stocks.
Step 4: Construction starts (3 years)
After the completion of DPR, management decides how to proceed with the
construction.
Various types of construction civil, hydro-mechanical, electro-mechanical.
Company calls tender for construction
Step 5: Commercial Operation Date (COD)
Start selling electricity to Nepal Electricity Authority and the time to get return of
investment

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Concept Paper on YESS (Youths for Energy Sector and Society)

2.6 Proposed Management Structure
The Board of the Youths for Energy Sector and Society shall be a voted panel of members
consisting at least 7 members amongst the member of the organisation. The proposed tenure of
the board would be 5 years. In case of management of the organisation, the Organisation shall
appoint young and energetic youths for the execution of the cause that the organisation has
been raising.
In case of SPV, the following structure is proposed.
General Meeting
Board of directors
Audit Committee
CEO

Finance &
Management

Project
management

Project
Development

The management personnel shall be young, energetic and qualified professionals with expertise
in concerned field.

2.7 Rate of Return

Youths for Energy Sector and Society is a social organisation proposed to be registered for
taking an initiative role from youth in the development of the nation. However the proposed
project is a business organisation which would ensure the attractive rate of return.
If we analyse the current situation of hydropower projects in Nepal, These projects are capable
of providing an average return of @15% after the completion of gestation period. The rates
could be even attractive if the project could be efficiently managed and accomplished within the
time frame as planned.

2.8 Current Business thrust

After the devastating earthquake in 25th April 2015, many foreign/domestic investors are
exploring investment avenues in Nepal as billions of dollars are required for the reconstruction
of the country which would definitely increase the economic activities in the country. Thus, all
this investment and industrialization process would only be succeed if the country would have
adequate investment in the infrastructure sector. So the development of hydropower sectors is
an inevitable part for the overall economic enhancement of the nation.

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Concept Paper on YESS (Youths for Energy Sector and Society)

3. Conclusion
Youths are considered as the assets of any country. Country seldom grows unless youths of
nation join hands together towards growth of the nation. Its never too late to act for the right
cause and lets start working today. By raising a finger for blaming the inadequacy of government
policy and the deep seated corruption, we are contributing nothing much than the ones we
blame. So Lets be committed for development, Lets be committed for change; Lets be
committed for youth unity; Lets be committed for creating self-sustaining growth of the
country. After all, a country can never be called independent and sovereign if it relies on
another country for its food and energy demand.
YESS Together We Can
Dream of Youths, Done for Nation
,

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