NATIONAL 3 -(Spotlight Weekly)

In The News

Before privatizing the BPC, the government may negotiate with the two bidders of the profit making company

-By A CORRESPONDENT

Amidst the news reports that the two bidders -- Independent Power Corporation (IPC), a joint venture of British and American companies, and Interkraft Nepal, a consortium of five Norwegian and nine Nepalese companies -- are "vying" to bag the Butwal Power Company (BPC), an undecided government is reportedly planning to sit with the two parties for "negotiations."

Butwal Power Company : all eyes on it

An informed source told SPOTLIGHT that the government will be calling in both the parties for necessary negotiations in a bid to privatize the BPC -- estbalished more than 30 years ago as a public limited Company. Some seven years ago the BPC was turned into a public limited company.

"Perhaps the meeting between the government and the two parties will take a decisive turn in the privatization of the BPC," says the source.

The "persisting" official indecision regarding the privatization of the BPC followed after IPC and Interkraft submitted their bids last year. The IPC has reportedly quoted 10 million US Dollars for the 75 percent shares of the BPC while Interkraft has offered a little above eight million US Dollars under non conditional bid. Under its conditional bid, it has quoted a little above 11 million US Dollars.

Government officials, earlier at different meetings, stressed that the bid should cover the following components: BPC's share in Himal Power Limited which is constructing 60 MW Khimti Project estimated at 4.95 million US Dollars, BPC's investment in Nepal Hydroelectric valued at 0.5 million US Dollars, BPC's net current assets of about 2.85 million US Dollars and the company's net present value of expected income from power sales from Andhikhola and Jhimruk to Nepal Electricity Authority over two years under existing Power Purchase Agreement (PPA).

After it completed the construction of 1 MW Tinau Hydropower project some seven years ago, BPC was taken over by the government. Later on, with the grant assistance of Norwegian Government, the power company constructed 5MW Aandikhola and 12 MW Jhimruk hydropower projects.

After the completion of these projects, the Norwegian grant was turned into the government's share. As a result, today, the government owns 97 percent of BPC's shares. With most of its power generation sold to NEA under the PPA, BPC sells some of its power for rural electrification. The existing PPA between the NEA and BPC remains valid till July 15, 2001.

After the completion of 60 MW Khimti Hydropower project -- being built by Himal Power Limited -- on which BPC has its 15 percent share, the power company will be able to generate above 25 MW of electricity by 2001. According to the latest auditing report (1997), the company has a fixed asset of above 810 million Rupees and has made the profit of above 180 million Rupees.

Considering all these, knowledgeable observers claim, that the bids the government has received on BPC's privatization is much less than what the company deserves. According to Martin Chautari, an NGO working on social development and investigation center, the tender price offered for the BPC, after it starts generating 26 MW of power, is 400 US Dollars per Kilo Watt of electricity. "Compare that to the NEA's investment of 2300 US Dollars for each kilowatt of electricity in the Kali Gandaki and Puva Khola hydropower projects," claims a press release of Martin Chautari.

Whether the government will raise this issue, if it holds any water, during its meeting with the two bidders in the near future is yet to be seen.