Nepal Development conference 4 Trade and Investment Embassy of Nepal & Britain Nepal Chamber of Commerce (BNCC) on 13th November 2018 At Nepal Embassy London, W8 4QU

1. Investment opportunity in Nepal’s Energy Sector
Ramhari Poudyal
PhD candidate
Swansea University Electrical and Electronic Engineering Department
Nepal Development conference 4
Trade and Investment
Embassy of Nepal
&
Britain Nepal Chamber of Commerce (BNCC) on 13th November 2018
At Nepal Embassy London, W8 4QU

2. Energy Scenario
• Nepal’s Hydropower is around 80,000 MW, out of which 43,000 MW is estimated
to be economically feasible.
• Demand for electricity is increasing at 7–9% per year
• World’s demand is just 2.2% in 2018
• Nepal is targeting graduating from least developed country (LDC) status to
developing country status by 2022 and aims to become a middle income country
by 2030. To meet its growth aspirations, Nepal will need to add 6,000+ MW
• It requires investment of approximately USD 13 - 18 billion by 2020. Consequently,
a lot of industries and infrastructure projects are in the pipe- line opening up huge
opportunities.
• Landlocked country on the southern slope of the Himalayas. The geographical
position of the country plays a significant role for its development as a business
hub as it lies in between the world’s two giant economy - India and China.
• The half of the global energy demand takes place by India and China
• India’s current installed capacity is 281 GW. India requires an annual addition of
50–60 GW per year from their current addition of 15–20 GW per year to meet this
soaring demand.
• Similarly, the electricity demand in nearby Bangladesh (population 156.6 millions)
is increasing at a rate of 9% per annum. GDP growth rate of 7%, peak demand of
Bangladesh is expected to reach 12.6 GW by 2017.
• The new opportunities of power trade in the South Asian Association for Regional
Cooperation (SAARC) region, especially with India and Bangladesh, Nepal has the
potential to export a significant amount of power once it reaches power surplus.

3. Energy Resource Potential in South Asia
Source: Background Paper on Cross-Border Electricity Trade in South Asia: Key Policy,
Regulatory Issues/Challenges and the Way Forward, Jan 2016 - IRADe

4. Nepal has maximum
prospects for
investment in water
resources, tourism,
mineral resources,
agriculture among
other sectors as
presented in this
diagram.
As Nepal has entered
the phase of the
economic build-up of
the nation after
consolidating political
changes, country need
for infrastructures and
modern amenities is
huge. The growing
middle class is creating
a healthy demand on
the economy.
Potential
areas of
Investment
in Nepal
Energy
Hydro 43,000 MW
Solar 2,100 MW
Wind 3,000MW
$ 300 million in
2013/2014
6% of total
expenditure
Tourism
8 out of 10 highest
peak in the world
Mountaineers,
Trekkers and
adventures seekers
Religious tourism
Lumbini & Pashupati
Infrastructure
Only 19% road in Nepal
is all weathers and 2 out
of 75 districts are still
not connected by roads
Invested $ 11.8 billion in
2010 - 14
Agriculture
accounts 32% of GDP
2/3 of the labour market
Processing, packaging and
branding
Tea, Coffee and Honey
Organic crops
Mines and Minerals
5 billion metric tons of
dolomite
180 million metric tons of
high grade magnetite
Probability of Petroleum
and natural gas to be
explored
Health and Education
Thousands of students go
abroad for higher studies
spending large sums of money
Health infrastructure,
modernisation of health
facilities and manufacturers of
Pharmaceutical goods
Information and
Communication
Technology
NTC/Ncell
Internet penetration
Potential areas of Investment in Nepal

5. Some Major Hydropower Projects in Pipelines
The GoN’s plan of 26 GW by 2035 will require approximately US$50 billion over 20 years.
Assuming $ 2 million/MW
Hydropower
Projects
Capacity (MW) Domestic Energy
Share
Cost Estimate ($ M) Status
Upper Karnali 900 12% free to
GoN(option to buy
additional power)
1,050 PDA signed
Arun III 900 21.9% free to GON
(option to buy
additional power)
1,009 PDA signed
Upper Marsyangdi 600 To be decided 723 Generation license
applied
Upper Trishuli 1 216 100% domestic 580 PDA Signed
Tamakoshi 3 650 To be decided 925 To be bid out
West Seti 750 100% domestic 1,000 JVA initiated
Upper Arun 335 100% domestic 445 - -
Upper Tamakoshi 456 100% domestic 441 Under construction
Budigandaki 1,200 100% domestic 2,593 Under construction

6. Tax and VAT Exemption
Incentive
Category
Ordinary
Provisions
Incentive Provisions
Income Tax Normal Tax Rate:
25%
Tax Rates:
Build, Own, Operate and Transfer Model (BOOT) projects;
construction of powerhouse , hydropower generation and
transmission: 20%
Income generated by entity from export: 20%
For hydro generation and transmission entities listed n the stock
exchange: 10% exemption in normal tax rate
Tax Holiday
Licensed person or entity producing electricity through
hydropower, solar, wind and bio fuel, starting its commercial
production, transmission or distribution within April 12, 2024: 100%
exemption for 1st 10 years and 50% exemption for next 5 years
10% exemption in normal tax rate for industries engaged in hydro
generation and transmission and listed in the stock exchange.
Disclosure Norms
 Income source discourser not required for investment made in

7. Incentive
Category
Ordinary Provisions Incentive Provisions
Depreciation
Provisions
Applicable Pool
Pool A: 5%
Pool B: 25%
Pool C: 20%
Pool D: 15%
33% accelerated depreciation for BOOT projects, construction of
power house, hydropower generation and transmission.
Investment made during a year on replacement of old machineries
after deduction of the accumulated depreciation till that year allowed to
be booked as expense.
50% depreciation shall be allowed to in the year of purchase of
equipment to produce energy for the business
Value Added Tax
(VAT)
0% VAT facility based on a recommendation from AEPC for batteries
produced and supplied by Nepalese industries for use in solar energy
producing industries.
VAT exemption on the import of machinery, equipment tools, and their
spare parts, penstock pipes or iron sheets used in hydropower projects
and produced in Nepal (based on the recommendation of the
Alternative Energy Promotion Centre or the Department of Electricity
Development).
VAT exemption for equipment and machines, tubular batteries, solar
lead batteries, required by bio-gas, solar, wind energy industries (based
on the recommendation of the Alternative Energy Promotion Centre)
Custom Duty Various Duty on generation plant having a capacity e

8. Purposed Connectivity between India & Nepal
Source: Support for Sustainable Energy Management and Reforms Workshop on Power Import / Export
Option, PWC

9. World Risk Index Rankings, measuring exposure
to severe weather
(where 1 is greatest exposure)
Source: United Nations University, Institute for Environment and Human Security
COUNTRY RANK
Nepal 19
Canada 91
China 26
India 17

10. Imported cement / clinker in NRs 10,00000
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2013 2014 2015 2016 2017
6,143
8,883 9,835
24,961
30,159
Imported cement / clinker in NRs 10,00000

11. Reasons to invest in Nepal
•Large pool of
capable workers
•Ease of doing
Business
•Strategic Location
& Geographic
advantage
•Low competitive
Environment with
potential for high
profitability Energy
Transport
Agriculture
Tourism
Infrastructure
ICT
Mines & Minerals
Financial Institutions
Health & Education
Located between two
large and rapidly emerging
economies India and
China
Duty free and open
boarder access to India
Duty free access to China
for over 4000 products
Incredibly rich bio-
diversity and abundant
water resources
61% working age
population
Highly cost effective
Labour
Minimum monthly wage
being approx. $ 76
Ranked 2nd after Sri Lanka
among South Asian Countries
in the “Ease of Doing Business
Report” by World Bank
100% FDI allowed in various
sectors
Easy repatriation of capital
and pursuit to the investors
home country
Various bilateral investment
protection and double tax
avoidance arrangements in
place

12. Nepal’s International Memberships
Nepal’s
Internationa
l
Membershi
ps
United
Nations
SAARC
World Trade
Organisatio
n (WTO)
Multilateral
Investment
Guarantee
Investment
Monetary
Fund (IMF)
Asian
Developme
nt Bank
(ADB)
Belt and
Road
Initiative
(BRI)
World Bank
Asian
Infrastructu
re
Investment
Bank (AIIB)

13. An agreement between India & Nepal
for power trading the cross border flow of power
An agreement
between India and
Nepal for power
trading the cross
boarder flow of
power
Power Trade
Agreement Oct
2014
Project
Development
Agreement
SAARC Framework
Agreement on Energy
Cooperation Electricity
(Nov 2014)
Agreement
with
Bangladesh

14. Foreign direct investment (FDI) in Nepal by
sector
Source: Nepal-India Chamber of Commerce and Industry, 2013-14
12%
4%
0%
35%
23%
2%
24%
Tourism
Agro Based
Construction
Energy Based
Manufacturing
Mineral
Service

15. Conclusion
• Nepal is a virgin land for investor
• The GoN has taken bold steps in benefit of both
the promoters and the nation.
• Huge incentive on tax and VAT on the benefit of
the promoters.
• The GoN should adopt the policies which will
allow the investors to develop projects hassle
free and reap maximum benefit .
• The GoN should build new transmission lines
ASAP to prevent dissipation of energy from the
grid and Transmission lines.

16. Thank you for listening!
• Any Question?
• Contact
• rhpoudyal@gmail.com
847043@swansea.ac.uk