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Economic Impact of Hydropower in NepalHow hydropower is changing Nepalese Economy?

By Group 6:• Anu Katwal• Esha Khokali• Sudeep Lama• Sushil Kumar Tripathi• Pratil Koju

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Introduction to the report• Why report?• Topic?• Objective of the report?

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Presentation of report• Introduction to Nepalese economy • Introduction to Hydropower• Hydropower and Nepalese economy• Opportunities/ threats• Economic impact of hydropower

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Nepalese Economy: Highlights• Small land locked country in South-East Asia,

located in between two Asian giants• Heavily dependent on India• GDP(at basis price) stands at NRs. 690.3

billion• Per capita GDP USD 762

2010/11 2011/12 2012/13 2013/14 2014/150123456

3.9

4.63.8

5.13

GDP growthSource: Economic survey 2015

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Nepalese Economy: Highlights conti…

• Sector wise breakdown of the economic

Agri-culture

32%

Industry15%

Service53%

Contribution to GDP

Source: Asian Development Bank

2010/11 2011/12 2012/13 2013/14 2014/1501234567

4.5

4.6

1.1

2.91.9

4.3

3

2.76.2

2.63.4

55.7 6.3

3.9

Growth of each sector

Source: Economic survey 2015

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Hydropower: Introduction• Use of water to generate electrical energy

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Introduction to the report

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Hydropower: Introduction conti…• Use of water to generate electrical energy• Types of Hydropower• RoR (Run of river)• Storage

• Resources required• Theoretical resources• Technical resources• Economic resource

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Hydropower and Nepal• First hydropower is Pharping hydropower plant, 1911 AD• Inaugurated by His Majesty King Prithvi Bir Bikram Shah.• The plant was equipped with two turbine each of 250 KW.• A reservoir with 200ft. Diameter and 18ft. Depth with the

capacity of 5,28,733 cum.ft. was built• The equipment of this plant was grant from the British

Government and other expenditures were borne by Nepal Government.

• The plant was constructed under the overall supervision and monitoring of General Padma Sumsher JBR.

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Hydropower and Nepal• Nepal is rich in hydro resources, with one of the highest per

capital hydropower potential in the world.• Theoretical power/ Economically feasible potential is

approximately 83,000MW/ 42,133MW• NEA has been responsible for generating and distributing

electricity across the country• At present, the total hydroelectricity generation has reached

782.45MW which is 0.94% of total potential.• Independent Power Producers(IPPs) have been the ongoing

institutional innovations in the power sector of Nepal.

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Hydropower and Nepal : Opportunities• Nepal possess 2.27% of world water resources (5% of total surface area of

the country)• There are 6,000 rivers including rivulets and tributaries totaling about

45,000 km in length.• Theoretical potential of generating 83,000 MW of electricity of which only

42,133 MW is economically feasible.• In dry season power is expected to be insufficient to meet demand in the

future.• Increase in manufacturing industries which leads to increase in

hydropower• Export potential to India due to PTA.

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Hydropower and Nepal : Opportunities• As per of tis plan to electrify the entire country, the Government

of Nepal plans to construct extensive transmission infrastructure.• Nepal is facing acute power shortage and huge opportunities

exists in the hydropower sector for investors to meet this gap in demand

Electricity demand and supply (MW)

2010/11

2011/12

2012/13 2013/14 2014/15

Production 697.85 705.57 746 746 782.45High Demand 946.1 1026 1094 1200.98 1291.1Demand supply gap 248.25 320.43 348 454.98 508.65Unmet demand of

electricitySource: Ministry of Energy

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Hydropower and Nepal : Opportunities

Source: Ministry of Energy

2010/11 2011/12 2012/13 2013/14 2014/150

200

400

600

800

1000

1200

1400

Electricity: Production, demand and gap

Production High Demand Demand supply gap

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Hydropower and Nepal: Threats• Problems of labor union• High demand of local peoples• Our capital market is not well established, so it is quite

difficult to raise fund from capital market for mega projects.

• Unstable government.• Unavailability of technical manpower and machineries .

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Hydro Development Policy, 2001• To generate electricity at low cost.• To render support to the development of rural economy

by extending the rural electrification.• To develop hydropower as an exportable commodity• Implementation of hydropower projects based on the

concept of Build, Operate, Own and Transfer (BOOT)• Non- tourist visa and work permit shall be provided to

the investor of a hydropower projects.

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Hydro Development Policy, 2001• VAT is not levied on the electricity tariff, VAT shall not

be imposed on the industrial machineries, equipment and spare parts imported, after obtaining permission, by a project so as to use them in the construction of hydropower project

• Only one percent customs duty shall be imposed on the devices, equipment, machineries and spare parts related therewith to be imported with permission by the project during the construction phase.

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Economic Impact of Hydropower

Hydropower

Projects

Economy

Construction industries

Industries sector

Government revenue and infrastructure development

Bank and financial

institution

Employment

Capital markets

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Economic Impact of Hydropower conti…• Construction industries• First sector to be affected by hydropower• Construction of dams, tunnel, roads, power

plant etc• Av cost NRs. 1 billion for 7MW power plant• Plants of 1000s MW are in construction

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Economic Impact of Hydropower conti…• Construction industries

6%

94%

GDP contribution

Construction industries

2010/11 20111/12 2012/13 2013/14 2014/1501000020000300004000050000600007000080000

Construction with compare to GDP

Construction GDP (at basis price)

Source: Economic survey 2015

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Economic Impact of Hydropower conti…• Employment• Two way effect• Direct employment

power plant construction and operation (lasts up to 100 yrs.)

• employment by increasing consumption and income of people

Direct effect

Indirect

effect

Employment

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Economic Impact of Hydropower conti…

Economic growth

Unemployment rate

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Economic Impact of Hydropower conti…• Industrial sector• Provide cheap electricity for running heavy

machinery• As compare to hydro electricity, other energy is

far more expensive• Helps to avoid the effect of Load shedding• The productivity loss of whopping NRs. 59 Billion in 2008

• Encourage entrepreneur• Direct impact on cement and iron rod industries

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Economic Impact of Hydropower conti…• Industrial sector

2010/11 2011/12 2012/13 2013/14 2014/15*01234567

Trend of Industrial growth and GDP growth

Real GDP (in basis price) Industry sector

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Economic Impact of Hydropower conti…• Capital markets

Public issue

Strong and

diversified capital market

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Economic Impact of Hydropower conti…• Capital marketsHydropower Companies listed in NEPSE

Market capitalization (in Rs)

Arun Valley Hydropower Development Co. Ltd.

2,189,880,264

Butwal Power Company Limited 10,711,306,335Chilime Hydropower Company Limited 40,475,635,200National Hydro Power Company Limited 1,676,075,302Ridi Hydropower Development Company Ltd.

1,452,000,000

Sanima Mai Hydropower Ltd. 8,418,900,000TOTAL 64,923,797,101

Source: Nepal Stock exchange (2015-09-17)

• Barun hydropower• Api power

company• Upper tamakoshi• HIDCL

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Economic Impact of Hydropower conti…• Capital markets

Public

issue

Strong and diversified

capital market

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Economic Impact of Hydropower conti…• Capital markets

Fiscal Year 2014/15

Total Market Capitalization 100,403.48

Market Cap of Hydro Companies 6,921.18Contribution of hydro sector to NEPSE

6.89 %

Hydropower7%

others93%

Market capitalization

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Economic Impact of Hydropower conti…• Government revenue and infrastructure

development

• Along the project different infrastructure are built• Roads, bridge, dams, transmission lines etc.

• Government revenue increases through the tax and royalty received from hydropower plants• Many hydropower are government owned

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Economic Impact of Hydropower conti…• Bank and Financial Institution• Mostly hydropower capital structure is 70:30• Credit flow in BFIs• Loans in these sector is relatively less risky• Can get the benefit of refinancing service(4%)

provided by NRB

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Economic Impact of Hydropower conti…

Other impacts

Significantly decrease import of electricity from India

Construction of dam can provide good irrigation facilities to locale

Increase in the degree of electrification in the nation

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Conclusion

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• Economically poor country with GDP only 690.3 billion this FY 2014/15

• Nepal has huge water resources with one of the highest per capital hydropower potential

• The hydropower sector is growing• Economic impact of Hydropower• Construction industries • Employment• Industry sector• Capital market• Government revenue and infrastructure development• BFIs

Have a gorgeous day!