GMR Energy, the Indian developer of the Upper Karnali Hydropower Project, has made an offer to Bangladesh to sell energy from the plant at 10 cents per unit, a government official said.

GMR officials are visiting Bangladesh to negotiate the power purchase rate for the electricity that will be produced by the project, a GMR source said.

The source told the Post that there was a high chance an agreement would be reached on the price for the energy to be sold to Bangladesh from the 900 MW plant to be built in western Nepal.

“We will probably sign a ‘term sheet’ with the Bangladeshi government to sell 500 MW of electricity via NTPC Vidyut Vyapar Nigam (NVVN) of India,” said the source.

“A final agreement will be signed after the rate and conditions mentioned in the ‘term sheet’ are approved by the Bangladesh Power Development Board.”

A term sheet is a nonbinding agreement setting forth the basic terms and conditions which will serve as a template to develop a detailed legally binding agreement in the future. “During the negotiations, the power purchase rate can be bargained down to 9 cents per unit,” said the source.

Power hungry Bangladesh signed a memorandum of understanding (MoU) with India’s NVVN to import electricity from the Upper Karnali scheme via India during Bangladeshi Prime Minister Sheikh Hasina’s visit to India in April 2017. As Indian laws don’t allow private developers to export electricity produced in third countries over Indian transmission lines, Bangladesh signed an MoU with the state-owned cross-border electricity trading agency while GMR was a witness.

The recent development means the Indian developer of the Upper Karnali hydropower plant is close to securing a market for the electricity produced by the project. Nepal will receive 108 MW out of the remaining 400 MW for free while GMR will sell the rest to the government of the Indian state of Haryana. 

This will also help GMR to arrange funding for the construction of the power plant because the lender will approve credit only if a market for the electricity to be generated by the project is secured. Once the final power purchase agreement is signed with Bangladesh, the Indian developer will immediately initiate negotiations with multilateral lenders to secure loans to build the plant, according to the GMR source.

GMR needs to conclude the financial closure by September 2018 as per the extended deadline. The Indian company was originally required to complete the financial closure by September 2016 as per the project development agreement (PDA) signed with Investment Board Nepal in September 2014. IBN pushed back the date at the request of the Indian company.