Energy export will earn Bhutan Nu 45B by 2018


However, net revenue, after adjusting for annual debt repayment, works out to Nu 22B

Bhutan’s yearly gross revenue from hydropower export to India would be around Nu 45B by early 2018, according to estimates made by a private research firm.

By that time, Punatsangchu I, II and Mangdechu are expected to be commissioned and generating power. While these three new projects would earn around Nu 34B annually, the projects existing today – Tala, Chukha, Kurichu and Basochu – earn Nu 11B annually.

The estimated revenue figure has been arrived after considering total generation by each project and a unit price of generation.

According to the generation tariff revision proposal by the Druk Green Power corporation (DGPC), the estimated price of electricity for Punatsangchu I is estimated to be Nu 3.49 a unit, Nu 2.97 a unit for Punatsangchu II and Nu 2.79 a unit for Mangdechu.

The tariff indicated in the proposal has been arrived at according to the norms set by India’s central electricity regulatory commission (CERC).

The managing director of DGPC, Dasho Chhewang Rinzin, said, while calculating the tariff various inputs, such as depreciation, interest repayment, operation and maintenance, cost and return on equity is accounted for.

Depreciation is derived by dividing total project cost by plant life. Hydropower projects have an average plant life of 30 years. Therefore, Punatsangchu’s depreciation cost a year would work out to Nu 3.6B each year.

Its total project cost, including interest accumulated during construction, works out to Nu 110B. The operation and maintenance cost is a certain percentage of the capital cost, which is set by CERC. CERC is equivalent to Bhutan electricity authority and responsible for reviewing and regulating electricity tariff rates.

But the projects would be required to make repayments for the loans taken to build them. For the 1200MW Punatsangchu I, the loan component makes up to 60 percent of the total project cost, while for Punatsangchu II and Mangdechu, it is 70 percent, the remainder being grants.

Therefore, the net revenue, after adjusting for the annual debt repayment, works out to Nu 22B by 2018 from all the hydropower projects. In other words, the economy will be left with Nu 22B after making the debt repayments. While Chukha’s loan has been paid off, Tala’s would be liquidated in 2020, and Kurichu’s in 2016. Punatsangchu I has a repayment period of 12 years, while it is 15 years for both Punatsangchu II and Mangdechu. As of today, the interest rates for the three projects are 10 percent.

Against the Nu 22B net revenue, Bhutan’s short-term liabilities would have reached Nu 39B by 2018, according to data available with the finance ministry. Short-term liabilities are borrowings made by the central bank from Indian commercial banks, Indian government and the swap facility.

Hydropower construction will peak during 2017, as most of the projects under the 10,000MW initiative would be under construction. This means, outflows would also increase, although subdued to some extent by the earnings made by the three projects that will start selling power to India.

The three projects, Punatsangchu I, II and Mangdechu have a combined capacity of 2,940MW. The projects would be generating about 12,951 million units of energy every year.

But after deducting royalty energy (15 percent of total generation, which must be provided free to the government) generation left for export is 11,032 million units.

Short-term liabilities reach Nu 50B in 2016-17 fiscal year and then drop to Nu 39B in the next fiscal, according to projections by the finance ministry.

Courtesy: Kuenselonline