Nepal Hydropower Development Project Quarterly Report FY15Q04

During this period, the project team met with Government of Nepal officials, developers, donors, and other stakeholders, including civil society organizations. The team created and submitted the Year 1 Work Plan and Monitoring and Evaluation Plan before the deadline and initiated technical activities and capacity building with counterparts. Critical decisions were made on the project's path forward, including focusing efforts on two high hydropower plant projects with active project development agreements, prioritizing a collaborative approach with other donors, and defining the project's critical mission. The project team also decided to use a risk-based approach to hydropower project development, utilizing Deloitte's D. Risk Framework to prioritize actions based on their impact in reducing barriers to project development. The project provided significant capacity building on regulatory frameworks that support hydropower financing, developed recommendations for the Government of Nepal to consider regarding foreign exchange risk management, and delivered related introductory workshops. Additionally, the project team provided workshops on the Indian power market and regulatory framework development. At the end of the first quarter, the project was supporting the Ministry of Energy and the Nepal Electricity Authority in facilitating the development of several high-priority hydropower projects, including the West Seti (750 MW), Upper Karnali (900 MW), Arun – 3 (900 MW), Tamakoshi 3 (650 MW), Upper Mars-yangdi II (600 MW), and Upper Trishuli 1 (216 MW) projects. In terms of progress towards project results, Component 1 of the project, which focuses on advisory support to facilitate the development and financial closure of large and medium hydroelectricity projects, made significant progress in reducing policy risks. The project team completed an initial review of the current project development agreements and developed a risk matrix that included the main policy risks impacting the current PDAs. Component 2 of the project, which focuses on advisory support to the Ministry of Energy, the Nepal Electricity Authority, and other key sector stakeholders with designing and implementing targeted electricity sector reforms, made progress in addressing country risks. The project team drafted a report on foreign exchange considerations for power trade with India and beyond and provided a presentation to high-level officials from the Ministry of Energy and other ministries/agencies on the project's proposal for reducing foreign exchange risk for new hydropower projects. The project also began work on designing and supporting a public awareness campaign to mitigate critical risks and barriers to hydropower transactions, although no work was done during the quarter. Additionally, the project team identified two priority hydropower projects for support in Year 1 and began working closely with USAID/Nepal staff to address barriers to completion of the hydroelectricity projects as they emerge.