Himal Press 
KATHMANDU: The Independent Power Producers’ Association, Nepal (IPPAN) has welcomed the government’s decision to issue letters of intent to private companies preparing to engage in cross-border electricity trading.
In a statement issued on Tuesday, IPPAN said the Ministry of Energy, Water Resources and Irrigation’s decision opens the way for private power producers, who have so far been largely confined to electricity generation, to explore markets, identify partners and prepare power purchase and sales agreements with buyers in neighboring countries.
However, IPPAN has cautioned that a letter of intent provides only preliminary approval for preparations and does not guarantee a trading license. Companies would still need separate licenses to conduct formal trading, implement agreements, book transmission capacity and secure open access to transmission networks, it said.
“The existing provisions could expose companies to substantial financial and legal risks if they invest in feasibility studies, consultancy, legal services and negotiations with foreign buyers but ultimately fail to obtain licenses,” IPPAN said. “Such uncertainty could also discourage banks from financing electricity trading ventures, undermine confidence among foreign partners and damage Nepal’s credibility as a reliable electricity exporter.”
The association has also urged the government to address four key issues to make the initiative effective.
First, it has called for a clear provision in policy or law guaranteeing licenses to companies that meet the conditions specified in their letters of intent, submit quarterly progress reports and complete the required preparations.
Second, IPPAN has demanded the immediate publication of transparent criteria, procedures and timelines for issuing licenses, including requirements related to technical capacity, financial strength, minimum trading volumes and documentation.
Third, it has urged the government to issue licenses without delay. “With electricity surpluses increasingly occurring during the monsoon and demand rising in neighboring countries, the country risks missing export opportunities if the process takes too long,” it added.
Fourth, IPPAN has called for the swift completion of legal and technical arrangements for nondiscriminatory access to domestic and cross-border transmission networks, transparent transmission-capacity booking and clear determination of wheeling charges.
“This is because electricity trading will not be commercially viable without reliable access to transmission infrastructure, even if companies obtained licenses,” it added.
