Government to issue letters of intent to private sector for cross-border power trade

The government has moved ahead with a plan to issue letters of intent to the private sector in preparation for cross-border electricity trade.

Private companies will receive a trading licence only after completing the necessary legal and regulatory procedures.

Narendra Ballav Pant, vice-president of the Independent Power Producers' Association, Nepal (IPPAN), said the private sector has welcomed this step.

According to him, the private sector, which has so far invested in power generation, now wants to take part in buying and selling electricity as well.

The letters of intent are expected to help identify potential markets, hold discussions with domestic and foreign partners, and prepare power purchase and sale agreements.

Pant said the step is positive for the development of the energy sector and will encourage investors to look for new business opportunities.

Since most of Nepal's hydropower projects are run-of-river, they produce at full capacity during the monsoon but output drops sharply in winter.

For this reason, Nepal sells its surplus monsoon electricity through India's Indian Energy Exchange and buys back the shortfall in winter from the same exchange.

On the exchange's day-ahead market, electricity prices are fixed a day in advance.