नागा

Kathmende
Ata

duly 25, 2005

MESSAGE

Higa moment OF great pleasure and horor to met as the Chairman of Nepal Electricity Authonty (NEA j,
the country's largest public sector utility, co put few words into its annual publication "A 'car in Review
AbOs/0S"_ NEA is enlering its twenty first year of service at त very crucial juncture where the country demands
full devotion and optimal efficiency in its services to fulfill the growing needs and overcame the challenges
ahead, This occasion. on one hand, is a moment of gtory and jubilation for NEA fer what it has achieved in the
past and on the other. hand, il is an occasion 10 come out with conducive promises ta continuc to deliver and
excel [5 serviees inthe coming days.

The country is currently passing through a period of tunmoil but the future is bright with new initiatives
lo notalize the political situation, During the previous year, despite the odd situation, NEA has shawn breat
sincerity in its effort of maintaining 8 level of self-sufficiency in supplying electricity. The newer initiatives such
as he demand side management aiming of improving efficicacy of consumption ata périad which saw absence
of any major addition to its generation capability is an example of mature thinking by NEA management. The
internal unbundling. development of bye jaws for its business groups, perfhrmance appraisal sysiems,
community participation in electricity distribution and management खा mura! areas, public-private join! venture
initialives, inivatives for issuance of pewer bends, etc, have been remarkable achieveruéals in the past for which। aust thank "EA staff al all levels.

One of the indicators of a coumury's development [5 its energy consumptlon, We can inerefore foresee.
an increase in the current trend of power consumption with the country's cap Forward towards its path of
development. This growing need can be fulfilled with the addition of smell, median and large-scale hydropower
generation utilis. However the invesiment requirements, especially for medium and large hydropower projects
are high which compel us to constantly rethink the variaus ahematives oC एलिट financing. In this regard, WALA
can work fowards promotion of investment friendly environment within the country for public-private joint
venture endeavors for small and medium sized projects. Similarly il can work lowards creating more congenial
environment for attracting foreign investment: in medium and large storage type and ROR projects on a pricrity
basis. At he same time il can Facilitate in promotion of private sector through sharing its experience and
providing réquined technical assistance.

Efficient transmission and distribution of electricity is another 025 where NEA has to concentrate
more. In this reward, the effort made by NEA during the prewous year to avoid bottlenecks in transmission
through careful studies and develapmen of appropiate transmission praects is coenmendahle, [nvalveneal af
large number of Comunity Organizabons छ disinbuloor and Management of cieciricity पा rural areas is yet
ancihe: example of NEA's commitment to reach the rural consumers through effective participatien.। took
forward to seeing NEA perform ils duties and responsibilities in the most efficient manner.। thank all NEA s:aff
for the valuable contribution they have made through their honesty, hard work and dedication, and wish them a
bright future where they weuld feel glory chrough thet achievements as the corporate members of the country's
valuable public sector utility,

AE Tuist Giri
Minister for Water Resources and
Chainman, Nepal Hlectricity Auchocity

~

Dr. J.L. Karmacharya

I feel privileged to present, for the fourth successive year, the Annual Report to the General
Meeting covering twentieth year of business of Nepal Electricity Authority (NEA). I am happy
to report that new concept of governance in NEA business executed through performance
agreement monitored by specific, and predetermined performance indicators with provision
of half yearly performance auditing is now fully functional in all three businesses of
Generation, Transmission and Distribution. To further enhance the efficiency of sta., a new
sta. Performance Management System based on objective evaluation criteria is being
worked out and intended to be applied in a staged manner. Engineering services will be
given new mandate making its business more professional and transparent. I believe the
cumulative impact of the above measures will be far reaching and enable NEA to establish
itself as a modern utility. However, the improvement in financial area did not commensurate
with the above reforms. It has largely been because of the factors beyond NEA@s control.
Not so encouraging growth in industry and tourism, disturbances in development works and
damage to its assets due to insurgency, high cost of power purchased from IPPs together
with high cost of money invested through government lending and non adjustment of tariff
for last four years required to take in to the global inflation had an adverse effect on NEA@s
financial health. Some positive initiatives and efforts have checked any sharp deterioration
in NEA@s financial health compared to that of the previous year. One of the biggest
challenges NEA is facing is the lack of investment in its expansion activities. There has been
no significant additional investment either from multilateral/bilateral donors or from private
sector during all the four years. This has put severe stress on the development activities of
NEA. With its limited internal resources coupled with almost 75% of expenditure governed
by external factors, even the maintenance of the system could not be carried out up to the
expected level. However, in the rural electrification front, the picture has been encouraging
with the HMG/N financing innovative programs in this area.

Organizational Restructuring and Capacity Building within NEA

The organizational reform process initiated with an objective to operate NEA in commercial
principle and bringing in efficiency by reduced cost and increased revenue and profitability
has shown positive results. The process of @Internal Unbundling® with formal
establishment of Generation, Transmission and System Operation, Distribution and
Customer Services as its core business and Electrification and Engineering Services as other
business groups has been reinforced with the approval of separate by-laws covering the
operation of the main business groups. To run its core business semi autonomously and to
bring in accountability, the concept of auditing performance is already implemented in the
core business areas. By measuring performance results, comparing the results with
performance targets and by rewarding the performers and punishing the non-performers,
the system envisions to bring significant improvements in loss reduction, profitability and
strengthen customer focus and result oriented organizational culture. Independent auditors
have already completed the performance audit for all the core business. The preliminary
results as reflected in the audit report are very encouraging.

Most of the Distribution Centers recorded a reduction in loss-rate, positive change in
differential surplus and reduction in account receivables period. In the Distribution and

Consumer Services, the performance shows that:

a) Line connection to consumers from the day of application has been completed within 3 to
7 days in comparison to earlier job completion time of 25 to 30 days

b) No-light service has been improved with the grievance redressal time reduced to within 6
hours as compared to earlier no-time-limit situation.

c) Transformer fuse replacement has been executed within one hour at all accessible
locations.

d) Collection has improved to 95% as compared to earlier collection of less than 80%

e) Time of Day meters have been well marketed and promoted for use by the industrial as
well as commercial consumers.

Following the encouraging performance of most of the 20 Distribution Centers, 14 new DCs
have been formed. The managers of all 34 DCs are currently under performance contract.

The Transmission and System Operation business group has prepared a Grid Code, which
has been approved by the NEA Board.

NEA has continued its efforts to introduce computerization to enhance efficiency in its
operations. Computerization of the existing dBase billing system in nine Distribution Centers
and DCS branches have been up graded into Oracle based system. Additional eleven
Distribution Centers and DCS branches have undertaken computerization of the billing
system in Oracle based system. In order to reduce queuing time at the collection counters
NEA engineers have already developed and tested a system which shall enable the
customers to make payments through any bank. NEA, in this regard, is at the verge of
implementing a pilot project covering Lagankhel and Bhaktapur Distribution centers using
spare channel available in the fiber optic communication network installed by the LDC
project. Under Strengthening of Financial Management, application of computerization has
been extended to facilitate analytical and decision making procedures in the fields of
financial and inventory management by the adoption of a computerized accounting and
inventory management system in 72 branches. Realizing that its human resources are most
important assets and that training is a critical component of its institutional development,
NEA has embarked on a corporate approach to training by focusing on technical and
management skills for improved performance. Training programs are being continuously
developed with a view to meet training requirements of different levels of technicians,
engineers, managers, finance and administrative personnel working in the power sector.
The upgraded computerized Personnel Data Bank that has come into operation has also
contributed to realize a more efficient management of NEA@s human resources. The USAID
funded South Asia Regional Initiative/Energy Partnership program has been helpful in
institutional capacity building efforts of NEA. Under this program, NEA executives have had
the opportunity to interact with professionals and familiarize themselves with the current
trends of electric utility business in the region and the US. In addition USAID@s support in
the development of grid codes, transmission pricing, a road map for establishment of a
suitable computer networking and a study on the potential of power trade with India in the
context of promulgation of Electricity Act, 2003 in India will open new marketing horizon.

Operational Performance

The last financial year saw a remarkable increase in NEA@s system peak load. On December
4,2004 the interconnected system peak surged to a record 557.53 MW registering an 8.21
percent increase over that of the previous year.

Cumulative electrical energy availability during Nepal Electricity Authority, Fiscal Year
2004/05 - A Year in Review the last year for use within the NEA system totaled to a new
high of 2642.75 GWh. This is an increase of 11 percent over the previous year@s figure of

2380.89 GWh. The hydro and thermal generations of NEA were 1522.9 GWh and 13.67
GWh respectively. NEA purchased 864.79 GWh of electrical energy from IPPs and imported
241.39 GWh from Indian State Electricity Boards under the Power Exchange agreement
between India and Nepal. In fiscal year 2004/05, the electricity sales totaled 1964.39 GWh,
which is an increase of about 9 percent as compared to the previous year@s sales figure.
The total electricity sales comprised of 1853.69 GWh as internal sales and 110.70 GWh as
energy export to India. The internal sales volume increased by 11.70 percent whereas the
export decreased by 21.62 percent from the previous year. However, the quality of sales did
not turn out to be adequate, as the proportional revenue increase is not satisfactory. In the
same way, the

export also has not been up to the expectation. Last year saw a continued increase in
number of consumers in NEA@s integrated grid. The total number of consumers by the end
of fiscal year 2004/05 stood at 1159855 registering an annual growth of 10.05 percent. This
comprised of 1113740 consumers in domestic sector, 22500 in industrial sector, 6000 in
commercial sector, 9950 in non-commercial sector and rest in other categories of
consumers. The domestic consumers contributed 37.94 percent of the revenue while the
industrial, commercial and non-commercial categories contributed 36.23,7.58 and 7.07
percent respectively.

Financial Performance

NEA@s financial position in the FY 2004/05 has remained far from being satisfactory. The
atmosphere of insecurity prevailing in the country continued to slow down economic
activities, affecting the industrial performance which can be observed from the decreased
percentage share of revenue from the industrial sector. The rising cost of IPP energy was
another prime factor attributing to NEA@s grim financial health. Similarly, the tourism
sector, a significant revenue contributor, once again failed to regain its position as one of
the country@s major cash earners and dampened NEA@s hopes of picking up in revenue
generation. The security situation in rural areas made revenue collection extremely difficult.
The impact of adverse security situation was such that meter reading in some 100 thousand
households could not be done. However the overall financial indicators in many other areas
have improved. The increase in number of domestic consumers and subsequent sales
increase was a positive indicator. NEA@s total revenue increased over the previous year@s
figure by 6.72 percent to NRs. 13,389 million. NEA@s net fixed assets decreased marginally
by 0.37 percent to an estimated NRs. 58,747.48 million. Expenditure in generation including
cost of power purchases increased by NRs. 796.12 million over last years figure to NRs.
7,362.02 million. In transmission it increased by NRs. 41.21 million to NRs. 240.71 million.
Similarly distribution expenditure increased by 13.09 percent over last years figure to NRs.
1,556.23 million. While the administrative expenses increased by NRs. 22.54 million to Rs.
511.64 million. One of the reasons for increased administrative expenses was the allowance
of extra twenty percent of salaries to the employees In the fiscal year 2004/05 NEA
achieved an operating surplus of NRs. 1,529.59 million but registered a net loss after tax
and interest of NRs. 1,914.90 million.

Looking Ahead

In its continued endeavor to expand the generation, transmission & distribution
infrastructure in-order to make electricity available to the larger segment of population, NEA
prepared a new load forecast incorporating future electricity demand up to fiscal year 2020.
Least cost generation expansion plan was prepared to meet the forecasted demand and
investment plan was prepared to arrive at the financial resources requirement to finance
such endeavors. Similarly, transmission and distribution plans are prepared for efficient
transmission and distribution of electricity in coming years. Altogether 31, feasible
generation projects consisting of 6 NEA, 20 private and rest public-private joint venture
schemes will need to be commissioned within a period from FY 2005/06 to 2019/20 to meet

the forecasted demand. In the generation sector the 70 MW Middle Marsyangdi
Hydroelectric Project (MMHEP), undertaken with a grant assistance of Kreditanstalt fur
Wiederaufau (KfW) of Germany, is heading towards completion by Nepal Electricity
Authority, Fiscal Year 2004/05 - A Year in Review December 2007. Process have been
initiated for the arrangement of finance for the construction of Upper Tamakoshi (309 MW),
Upper Seti Storage (122 MW) and Chameliyagad (30 MW) hydroelectric projects.
Preliminary works will be initiated towards the construction of Kulekhani III (14 MW)
hydroelectric project during F/Y 2062/2063 under NEA@s own finance. Rehabilitation and
upgrading of Devighat (14.1 MW) and Sunkoshi (10.05 MW) will be under taken after the on
going studies are completed. Hewa (10 MW), Mewa (18 MW) and Tamur (83 MW) are other
projects for which NEA will proceed for the arrangement of financing.

In order to maintain system requirement, NEA will continue to encourage Private Developers
to help add electricity generation to the system. But as private sector is essentially
developing run of-the river plants, NEA will have to construct storage projects to maintain
the adequate balance between demand and supply throughout the year. For the intervening
period, NEA will be looking for arrangement with India to meet the shortfall in both seasons
across the border.

In order to improve quality and reliability of electricity supply the staffs manning Load
Dispatch Center will be exposed to additional training to develop and reinforce their
expertise in the high-tech facilities installed. Arrangement has been made with Siemens to
continue the training program into the coming year as well.

The effective enforcement of the NEA Grid Code is another area which will be pursued
vigorously in the coming days. The Code will also address many grievances of the Grid
Users and facilitate integration of non-NEA Grid Users into the national grid.

Augmentation of transformer capacities and establishing a culture of preventive
maintenance will continue to receive top priority. To reduce shutdown time, hotline
maintenance training will be imparted to maintenance crews and some emergency
restoration towers will be procured for quick restoration of transmission lines. Modern high-
tech testing equipment are also being procured to detect early signs of potential equipment
breakdown so that advance precautionary measures could be adopted to prevent their
occurrences.

Likewise, NEA is going all out to complete the Pathlaiya-Parwanipur 132 kV transmission line
project in the coming fiscal year. It will also spare no effort to expedite the implementation
of other ongoing projects, especially the Khimti Dnalkebar 220 kV transmission line and the
Thankot-Chapagaon-Bhaktapur 132 kV transmission line in the Kathmandu Valley. Financial
sources will also be sought for the construction of the Hetauda-Bardaghat 220 kV
transmission line, which is proving very critical in the operation of the national grid. Apart
from the transmission projects within the country, NEA will continue with its efforts to
contact various utilities in neighboring countries for their cooperation in its quest for
creating a regional grid in South Asia.

In the distribution sector measures will be taken to improve the availability and reliability of
distribution network by concerted effort on improved maintenance and capacity
augmentation of network components. Effort will also be made to continuously improve the
quality of consumer services in order to make it more customers focused and the Multi
channel Queue Management at present implemented at two distribution centers will be
implemented gradually at all distribution centers.

NEA will continue its engagement in rural electrification (RE) programs for meeting
electricity needs of rural people to uplift their economic standards through HMG as well as
donor assisted schemes. The ADB funded Rural Electrification and Distribution System
Reinforcement Project will start implementation of field work from the current fiscal year.
Similarly the ongoing rural electrification schemes such as the World Bank funded
Distribution and Rural Electrification Project in Bagmati zone, DANIDA funded Kailali
Kanchanpur RE Project in far western region and HMG funded Sindhu-Dolkha RE Project will

also continue to be completed in the stipulated time.

Under the latest TA received from ADB, detailed techno/economic and social studies will be
conducted for the preparation of proposed Rural Electrification and Renewable Energy
Project. Under the new Japanese Non Project Grant scheme rural electrification will be
initiated from the current fiscal year. Implementation of HMG funded community rural
electrification schemes will continue in several areas of the kingdom through people@s
participation. Efforts will also be made to add more number of communities managed rural
schemes as well.

Engineering Services will be made a subsidiary company for the development of hydropower
Nepal Electricity Authority, Fiscal Year 2004/05 - A Year in Review and to conduct detail
engineering design and construction supervision of power projects (generation, transmission
and distribution) to fulfill the long and short-term power demand of the country. The
Training Center will be gradually developed into a Regional Research Center for the
Hydropower Development. Effort will be made to extend its services beyond Nepal to other
parts of the world, individually or through the joint venture partnership.

A staff Performance Management System (PMS) based on two part evaluation has been
developed in house that will be test implemented during current fiscal year. The PMS will be
formally implemented from the beginning of FY 2063/64.

NEA will continue to apply efforts to comply with the International Accounting Standards
(IAS) recommendations in order to make the NEA@s Accounts in line with internationally
acceptable practices. A recognized international consulting firm will be employed to carry
out the task of improving financial management, accounts and auditing practices under the
grant assistance of the World Bank.

In line with the recent government declaration to permit NEA to issue long term power bond
in order to mobilize domestic financial resources NEA will issue Power bond to the size of
NRs 3 billion in total to meet the investment requirements in power generation projects. The
first power bond will be issued in the current fiscal year. NEA will continue dialogue with the
concerned government ministries for the reduction of prevailing re-lending rates applicable
to NEA in the context of decreasing trend of interest rate in the domestic financial market.

Acknowledgements

For the achievements and the progress that we have been able to attain I wish to thank all
those associated with NEA@s activities during the past year. I wish to thank His Majesty@s
Government of Nepal particularly Ministries of Finance and Water Resources for their
cooperation and continued support to our development activities. I also wish to express my
special gratitude to the Chairman and Members of the NEA Board of Directors for leading
NEA at such a difficult time. I also thank the Bilateral Donors such as Germany, Japan,
Norway, Denmark, Sweden and USA and development banks such as the World Bank, Asian
Development Bank, Japan Bank for International Cooperation and Kreditanstalt fur
Wiederaufau for their contribution in our development and institutional strengthening
activities. I regard their financial support, technical assistance and advices as crucial for our
achievements and steering NEA ahead.

Recapitulating my affiliation with NEA over more than three decades in different capacities, I
extend my sincerest thanks, for the continued support, hard work and cooperation I have
received from the entire sta. of NEA at all levels. I wish to express my special thanks to
those who have stood by me in times of trial. I have always enjoyed working with sta.
members of NEA at all levels. I believe the sta. members of NEA have appreciable latent
talent, capacity and dedication to lead NEA to newer heights of development. The
understanding and critical support of the unions must be appreciated.

Finally and most importantly, this acknowledgement would be grossly incomplete without
thanking our valued customers for their proactive interest in NEA@s activities and also for
bearing with us and sharing some turbulent times together. I feel confident that the day will
come in near future when NEA will be able to provide its valued customers with the highest

quality of electricity supply that is most reliable and adequate for their needs.

Thank you.
Dr. Janak Lal Karmacharya
Managing Director

Mr. S. S. Upadhyaya
General Manager

Mr. T. N. Thakur Mr. R. N. Pradhan Mr. J. Jha
Director Direcotor Director
Generation Operation and Kaligandaki 'A' HE Generation Construction

Maintenance Department Department Department

Middle Marsyangdi Hydroelectric Project

aia ale Mr. G. S. Pokhrel
Mr. S. R. Shrestha Director

Project Director

The signing of Performance Agreement between NEA
management and the General Manager of this

Business Group at the start of the fiscal year 19 a Charro bey Poe Sal Coil eulleny Meer Wi
1% Energy In IRS

milestone. The main thrust of the agreement was to
improve the reliability of the hydropower stations.

The generation availability has increased in this year
to 96.27% from the previous years value of 96.62 %

With a yearly plant factor of 38.60 % and the
average productivity ratio of 1162.68
MWh/employees, the energy generation from power
plants under this business group during fiscal year
2004/05 was 1533.57 GWh, which is 16.27 percent
more than that of the previous year. These
generation plants contributed 58.03 percent of the
total electrical energy available in the system.

Energy bre पात

The last fiscal year saw improvements in the
operation and maintenance of generation plants. New
meters were installed replacing the old ones at most
of the power stations for better accuracy of
measurements of the generated and the transmitted
units to the Integrated Nepal Power System (INPS). A
plan for the rehabilitation and upgrading of Sunkoshi
and Devighat Hydropower Stations is under study
through the Engineering Service, which is expected to
be completed by the mid of .scal year 2005/06
(2062/63).

Major Projects

ह-पलबा्डनाला एका ला Pa एको Brie Pe। 1।भिए9

amg tte बानि तु
i

Chameliya Hydroelectric Project

Chameliya Hydroelectric Project (CHEP) is a six hour daily peaking run-of-the river (PROR)
scheme with an installed capacity of 30 MW and average annual energy generation of
184.21 GWh. The project lies about 950 km west of Kathmandu in Chameliya valley of
Darchula District in Far Western Development Region. The detailed design and tender
document preparation of the project was completed in December 2001, with the grant
assistance from Korea International Co-operation Agency (KOICA).

Construction of access road needed for the project is in progress. Earthworks and Structural
works of 17 kilometers out of 18 kilometers of the road have been completed. Local
transportation services are in operation on the road. Construction of four number of bridges
out of the total seven number of bridges required for the project has been completed.
Similarly, construction of four numbers of buildings out of twenty proposed for camp facility
has also been completed. The Environment Impact Assessment (EIA) study as per the
Environment Protection Rule 1997 (First Amendment 1999) of the project and .nal dra.
report of 132 kV transmission line route has been completed. The IEE study of 35 km long
33 kV transmission line from Gothalapani, Baitadi to Balanch powerhouse site for
construction power supply has also been completed.

The project cost as per the Detailed Design Report, Dec. 2001 is US $ 74.90 million

including the construction cost of 131 km long 132 kV Transmission line.

The project is envisaged to be implemented with co-financing of HMG/NEA and other donor
agencies like. Govt. of Republic of Korea, Economic Development Co-operation Fund,
(EDCF) and Organization of Petroleum Exporting Countries (OPEC) Fund. As per the request
made by NEA, the Economic Development Cooperation Fund, Korea (EDCF) has shown
interest and given positive response for providing so. loan for electro-mechanical equipment
and transmission line portion including project engineering components of the project. In
this respect, NEA has already applied for the proposal for EDCF loan.

Kulekhani III Hydropower Project

Kulekhani III Hydroelectric Project is located about 40 km south west of Kathmandu in
Makwanpur District of Narayani Zone. This project lies on the right bank of Rapti River near
Hetauda-Bhainse Road. The proposed headworks site is located at Bhainse Village
Development Commi.ee. It will utilize a net head of 107 m and a design discharge of 15
cumecs to generate 14 MW of peak power. A 4.5 km long headrace tunnel, surge tank and
surface power house are the main components of the project. The power will be evacuated
to Hetauda through the second circuit strung on the KL-II- Hetauda existing 132 kV line and
a 500 m long new 132 kV line.

The Environmental Impact Assessment (EIA) of the project has been approved by Ministry
of Population and Environment (MoPE). The social and environmental impacts of the project
are minimum with only 25 hectares of agricultural land and a few households being a.ected.
Existing infrastructures in the vicinity of the project such as the Tribhuvan Highway,
transmission line from KL-II, dry port at Birgunj and the prevailing high security
environment in the area makes it more attractive. The project has been found technically,
financially and environmentally viable. NEA is planning to implement the project using its
own financial and human resources.

The project cost is estimated at US$ 27.60 million. It will be commissioned to meet the
peak demand of dry season by 2009. The annual energy output of the project will be 40.82
GWh. Detailed design of the access road and the bridge over the Rapti River has already
been completed.

Generation by Mapor Hydro Power Stations [ 206 1/62)

Power Stations Generation (GWh)}

This 70 MW project located about 170 km west of
Kathmandu, in Lamjung District is being funded by
KfW (Germany), HMG/N & NEA. In this year, most
of the night shift. works could not be carried out
due to imposition of curfew at the project area. The
Contractor DDC JV stopped its entire construction
works from August 24, 2004 citing security
reasons. The work could only be resumed from
January 03, 2005. The night shift could only be
started from April 25, 2005.

The major progress and the milestone of the
project:

Marsyangdi River was diverted on March 01, 2005
at the head works site. About 89% of the
excavation works has been completed in the head
works area by the end of June 2005. Similarly,
excavation of intake tunnels and valve chamber
has completed and power tunnel excavation has
finished up to about 67%. Lining of the power
tunnel started from June 21, 2005 and about 3.2%
of works has been completed. In the desanding
caverns, about 87% of excavation has been
completed. About 18% concreting of the control
section in the desander has been accomplished.
About 12% of surge tank excavation has finished.
About 98% of the pilot shaft excavation for the
surge tank excavation has been completed. In the
powerhouse area, about 93.4% of 1st stage
concreting and 31.4% of 2nd stage concreting
works has been carried out. Similarly, 25% super

Increase/Decrease over Previous ¥
Generation (%)

5.14
40.65। 0.
11.41
रै एज

162.01

Pa
25.75

0.60)

4.66

structure concreting work and about 61% of
concreting of outlet (tailrace) has been finished. As
for the status of the other lots, Mechanical
Equipment (Lot M) Contractor Voith Siemens
Hydropower Generation GmbH & Co. has
completed about 95% of its manufacturing works.
Presently, erections of two spiral casings are in
progress with about 65% work already completed.
Testing and commissioning of 132 kV GIS
switchgear equipment (Lot SS2) at the existing
lower Marsyagndi power station has been
completed by Alstom Energie-technik GmbH in
January 2004. The contractor of Electrical
Equipment (Lot E) ALSTOM Power Generation AG
has been instructed to start procurement of the
generator in Switzerland to commence
manufacturing of all Lot E equipments. Presently,
Alstom is carrying out vertical up linking of the
earthing straps at powerhouse. Commencement of
Transmission Line (Lot TRL) Project is awaiting
concurrence from KfW to start Nepal Electricity
Authority, Fiscal Year 2004/05 - A Year in Review
negotiation with the lowest bidder SAG. 132 kV
Substation/Switchyard (Lot-SS1) Contractor,
ALSTOM Energie-technik GmbH, has completed
manufacturing works and is in the process of
delivering the equipment. Lot HSS (Hydraulic Steel
Structure) Contractor VA-Tech Hydro is in the
process of fabrication of penstock at the site.
Installation of Manifold is almost completed.
Pressure testing of spiral casing, manifold and
Bifurcator are planned to start in Middle of August
2005.

Land and property acquisition as well as the
resettlement at various construction sites is about
98% complete. The project (RERU) has also carried
out income generation oriented training program
and community awareness program focused on
public health and tra.c safety to the members of
the project affected families and the local people of
the project The Neighborhood Support Programme
(NSP) of the project is supporting the development
activities of nine Village Development Commi.ees
(VDCs) in the vicinity of the project area by
carrying out various activities in five key areas of
Health, Education, Water Supply & Sanitation,
Roads and Electrification. Udipur Substation
upgrading to 5 MVA and the construction of 33 kV
new bay has been completed. Local electricity
supply is being supplied through the new bay and
the interruption due to overloading of the
transformer is avoided.

Mr. B. रि. Shrestha
General Manager

=

Mr. Y. K. Shah Mr. H. ने टे Mr. M. P. Khakurel
Director Director Director
. : TL/SS Construction System Operation
Grid Operation Department Department Department

The year took off with the successful organization of the Regional Grid Operators Forum
hosted by NEA in Kathmandu on August 18-19, 2004. It was a momentous gathering of the
leaders of the power industry in the SAARC region, which included Managing Director of
Power Grid Company of Bangladesh Ltd., Managing Director of Bhutan Power Corp.,
Chairman of Sri Lanka Electricity Board, representatives from Water and Power
Development Authority of Pakistan and Managing Director of Nepal Electricity Authority. The
main objective of this mega event was to reach a general consensus among the leaders of
the power industry for development of a regional power grid in South Asia to sustain and
accelerate the present economic boom in the region. As an outcome of this meeting, the
delegates were unanimous in recognizing the benefits of regional interconnection of power
grid and confirmed to work collectively towards the goal of establishing a regional grid in
South Asia. The conference was sponsored by USAID under the SARI/E program. The
signing of the Performance Agreement between the NEA Management and the TSO General
Manager at the start of the fiscal year was another important milestone in this fiscal year.
The main thrust of this Agreement is to gradually improve the operational efficiency of the
power system and eventually attain international standards by achieving a given level of
performance in various tasks. According to this Agreement, the TSO General Manager is
solely accountable for the progress of these tasks and it has prescribed a number of
performance indicators, like quality of power supply in terms of voltage and frequency,
availability of equipment, reliability of supply, productivity ratio and stock turnover ratio.
Other minor indicators include transmission loss, capital investment and budget
disbursement. These indicators carry different weights, the highest being assigned to
availability and reliability and the lowest to capital investment and budget disbursement.
The Agreement provides cash reward for the personnel of the organization as well as
penalty for the non-performing General Manager. An independent auditor appointed by the
NEA Management has completed appraisal of the performance of this group for the first
performance audit period covering the first six months of the fiscal year.

They have declared the results as very
encouraging and also recommended in
their evaluation report that this group
is qualified to receive financial reward
based on the criteria prescribed in the
Performance Agreement. The
implementation of the NEA Grid Code
in this fiscal year was another feather
in this group@s cap, although it came
into effect only in the last quarter of
the fiscal year. The Grid Code will also
a facilitate evacuation of power from
IPP@s and grid connection of high
voltage consumers. This year finally
Saw an end to the saga of the
stringing of the seven-km-long second
circuit on the existing Hetauda-
Dhalkebar 132 kV line. The work had
been suspended for over four years
because of the problem regarding
compensation for the right of way. The
work was eventually completed with
_ the cooperation of the security
personnel. Although this second circuit
has improved the security of the
power supply to the eastern region,
the problem of low voltage in the
Duhbi region still persists. This
problem will be partially solved when
the Khimti powerhouse is connected to
the Dhalkebar substation.

This group has also initiated handing over of
11 kV and 33 kV lines and substations,
which are presently being operated and
maintained by this group, to the appropriate
business group. As continuation of the
group@®s policy to install adequate number
of under frequency relays to enable
curtailing at least 50% of the system load
during low frequency emergencies so as to
minimize the number of system collapse and
at the same time reduce the duration of
system outages, the Grid Operation
Department has procured eleven additional
under frequency relays in this fiscal year
and these are being installed at appropriate
substations throughout the system. This
brings the total number of under frequency
relays installed in the system to fourteen. As
a result of their efforts, there has been
substantial improvement in system
operation since the new Load Dispatch
Center came into operation. The number of
system outages recorded in this fiscal year
dropped from 28 occurrences in the last
fiscal year to 23 occurrences, out of which
only 15 were attributable to system faults,
the other eight occurrences being the result
of relay malfunctions. Similarly, the
cumulative system outage duration in this
fiscal year stood at 409 minutes with
calculated energy loss of 1972 MWh during
this period as against 569 minutes of
system outage and 2703 MWh energy loss
respectively in the last fiscal year. The
Center was also able to achieve faster
restoration of the system as the minimum
and the average restoration time after
system collapse in this fiscal year was
registered at 3 minutes and 18 minutes
respectively compared to 7 minutes and 20
minutes in the last fiscal year. All these add
up to substantial revenue gain for the NEA.
Installation of fiber optic cables in the
communication system of the LDC has
already started paying. Last year one fiber
optic link was leased to Nepal Telecom. The
Department was able to increase its
earnings by leasing out another link to the
same Company. Several private parties
have also shown keen interest to rent these
optical links. Under the regular program, the
transformation capacity of existing

substations was augmented by 84.15 MVA
at different voltage levels.

Because of these additions the multi fuel
plants are no longer required to be operated
to meet 19 Nepal Electricity Authority, Fiscal
Year 2004/05 - A Year in Review the peak
load of the Duhbi region.

Similarly, Nepalgunj has stopped import because of capacity addition at Kohalpur
substation, which has also enhanced the operational flexibility regarding the utilization of
Tanakpur power station. It was a difficult year for the transmission line maintenance crew
as it faced one of its toughest ever challenges. The job involved erecting a 22 ton 65 meter
high tower in a very unfriendly environment that required the use of boats for conductor
stringing. It was by far the heaviest and tallest tower being handled by NEA. The original
tower located in Koshi Tappu on the bank of the mighty Koshi River had been brought down
to zero level by miscreants who had loosened the bolts at the lower end of the tower body.
The successful completion of this job has instilled tremendous confidence in the NEA
maintenance group as well as the local contractors who undertook the erection works to
Carry out any such job in any kind of terrain in the future. In the construction of new
transmission projects, TSO faced challenges on two fronts.

The first challenge was to resume the construction of the Pathlaiya-Parwanipur Transmission
Line Project, which had been suspended due to security problems in the site. The Project is
back on track and the TSO is channeling all its resources to complete the Project as early as
possible. The second challenge came from Hetauda-Bardaghat 220 kV Transmission Line
Project. TSO had planned to implement this Project during this fiscal year. In the absence of
this line, the Integrated Nepal Power System is being increasingly vulnerable to
interruptions. In this fiscal year the business group completed one new substation in the
Kathmandu Valley. Two transmission links dedicated for power exchange between Nepal
and India had to be dropped for the time being because the necessary commitment for the
construction of the line falling on the other side of the border had not been received. The
funds for these two projects are being reallocated in two new projects. Some of the projects
under the TSO are given below.

Birgunj Corridor 132 KV Transmission Line Project

The objective of this Project is to meet the power demand of the Birgunj corridor, which is
dominated by big industrial consumers. This will relieve the power congestion in the existing
66 kV lines and thereby improve the quality and reliability of the power supply delivered to
the region. The Project comprises of a new 132/11 kV substation with 2x /18/22.5 MVA
transformers at Parwanipur and 20 km of 132 kV double circuit transmission line from
Pathlaiya to Parwanipur. The Project is estimated to cost NRs. 254 million and Nepal
Electricity Authority is bearing this entire cost. At present, major substation civil works have
been completed including super structure for control building.

The substation equipment manufacturing works are under progress and expected to be
delivered for erection works soon. Similarly, works associated with transmission line and its
right of way (RoW) clearance is under progress. The project is expected to be completed by
fiscal year 2005/06.

Thankot-Chapagaon-Bhaktapur 132 kV Transmission Line Project
Under this project a 28 km long 132 kV transmission line from Thankot (Mata.irtha) to
Bhaktapur via Harisiddhi will be constructed. This will complete the 132 kV ring main in the

Kathmandu Valley. The line will comprises of double - circuit towers for about 26 km and
four-circuit towers for about 2 km. The scope of the project also includes the construction of
a new 132 kV switching station at Matatirtha, a new 132/11 kV, 22.5 MVA substation at
Harisiddhi and upgrading of existing Bhaktapur and Balaju substations. After completion of
the project, this will not only cater the growing power demand in the valley but also reduces
system losses and improve quality and reliability of the electricity supply in the area. The
contract for the construction of transmission line has been awarded and tenders have been
invited for the substation works. Estimated cost of the project is US$ 17 million and it is
jointly funded by the loan assistance of Asian Development Bank (ADB), Organization of
Petroleum Exporting Countries (OPEC), His Majesty@s Government of Nepal and Nepal
Electricity Authority. The project is expected to be complete by 2007.

Butwal-Sunauli 132 kV Transmission Line Project

The proposed transmission line is dedicated for power exchange between India and Nepal.
The transmission link connects Anandanagar substation situated in Utter Pradesh of India
with Butwal substation in Nepal through a double circuit 132 kV transmission line. Under the
Project a 25 km long 132 KV double circuit transmission line will be constructed from Butwal
substation to Sunauli (the intermediary point at Indo Nepal border) along with the
associated line bays at Butwal substation. The Project is jointly financed by His Majesty@s
Government of Nepal and Nepal Electricity Authority and expected to be completed in fiscal
year 2006/07 at an estimated cost of NRs. 140 million.

Khimti-Dhalkebar 220 kV Transmission Line Project

This will be the first 220 kV transmission line in the country. Its immediate objective is to
improve the reliability of power withdrawal from Khimti-1 HEP, provide a direct route for
export via Dhalkebar substation and improve the voltage problem in the eastern region. In
future, the line will also be used to evacuate power from the 300 MW Upper Tamakoshi HEP
and other generations in the Khimti region. The Project comprises of a 75 km long 220 kV
transmission line on double circuit towers from Khimti HEP to Dhalkebar along with a 132 kV
line bay extension at each end. Till Upper Tamakoshi or a similar large generating station is
connected to this line, only one circuit with ACSR, BISON duplex conductor will be strung
under the present scheme and charged at 132 kV level. The Project has already acquired
the necessary Environment Impact Assessment clearance from concerned authorities of His
Majesty@s Government of Nepal. The employment of the consultant for the Project is
complete. The cost of the Project is estimated at US$ 22 million and it is funded jointly by
International Development Association of World Bank, His Majesty@s Government of Nepal
and Nepal Electricity Authority. The project is scheduled for completion by the end of the
fiscal year 2006/07.

System Reinforcement Project at Chandranigahpur

This Project is designed to meet the increasing power demand of Chandranigahpur,
Harsaha, Haripur, Gaur and Nijgadh areas. This will improve reliability and quality of
electricity supply in these areas and reduce system losses as well. Under this project, a new
132/33 kV, 30 MVA, and 33/11 kV, 8MVA substations will be constructed at
Chandranigahpur. This new substation will be linked to existing 33/11 kV substations at
Harsha, Gaur, and Haripur through 33 kV sub-transmission lines with a total length of about
70 km. The project is estimated to cost US$ 6.5 million and it will be financed by
International Development Association (IDA) of World Bank, His Majesty@s Government of
Nepal and Nepal Electricity Authority. The project is expected to be complete by the end of
2007.

Grid Reinforcement Project
The Project is designed to augment transformer capacity at three substation, namely,

Suichatar substation in Kathmandu, Anarmani substation in Jhapa and Pokhara substation in
Pokhara. The existing 132/66 kV, 2x37.6 MVA power transformer at Suichatar substation
will be supplemented with a third 37.6 MVA power transformer. Similarly, one 132/11 kV,
7.5 MVA power transformer will be replaced by 31.5 MVA transformer at Pokhara and one
132/33 kV, 15 MVA power transformer will be replaced by another 30 MVA transformer at
Anarmani substation. The Project is estimated to cost

US$ 3.39 Million. The Asian Development Bank has agreed in principle to finance this
Project along with His Majesty@s Government of Nepal and Nepal Electricity Authority. The
Project is expected to be complete by 2007. Nepal Electricity Authority, Fiscal Year 2004/05
- A Year in Review

Hetauda-Bhardaghat 220 kV Transmission Line Project

A.er the expected completion of the Khimti-Dhalkebar 220 kV transmission line, this will be
the second 220 kV transmission line in the country. The immediate objective of this project
is to improve the reliability of power withdrawal from Kaligandaki @A@ hydropower station.
The proposed line will also form a segment of the 220 kV Grid that is being envisaged under
future generation expansion plans. The project comprises of construction of about 143 km
long 220 kV double circuit transmission line from Hetauda to Bardaghat. Till the Upper Seti
HEP is connected to this line, only one circuit using ACSR, BISON conductor will be strung
under the present scheme and charged at 132 kV level. Updating of route alignment survey
and Environment Impact Assessment (EIA) study for this transmission line is in progress.
Funding for this transmission line project is expected from Japan Bank for International
Cooperation (JBIC). The cost of the project is estimated at US$ 32 million.

K3 Substation Project

Constructed with grant assistance from the Government of Japan at a cost of US$13 million,
the project was commissioned on March 2005. The project comprises of a new 45 MVA
66/11 kV GIS substation connected to the existing Teku and Suichatar substations through
a 3.5 km long 66 kV double circuit underground cable. The project aims at relieving the
stresses on the existing distribution system in the central part of Katmandu city
accompanied by a reduction in system loss and improvement in quality and reliability of
supply in the area.

बु १२ छि ce . 7
Mr. 6. 8. Shrestha
General Manager

Mr. 6. B. Shrestha Mr. D. N. Singh Mr. C. B. Bajracharya Mr. T. M. Shakya

Director Director Director Director
Distribution Eastern Reg. Office Central North Reg. Technical Serv. &
Consumer Servicies Office Comm. Dept

@ र

Mr. रि. Yadav Mr. Tika Ram B.C. Mr. R. C. Mandal Mr. G P. Raj
Director Director Director Chief
- Mid & Far Western Central South Reg.
Western Reg. Office Finance Department Reg. Office Office
"wll OF CONSUMERS
1200000 _
jogoogg
छ scoond _
E।
[र 600000 = '
1] _
5 4cocad।
200000।
1897 गकप Deir 2000 101 पि 20) गा 2005
Fiscal Yoar
हा Domeshe —Olhers r Total

The Distribution and Consumer Services (DCS) Business Group is responsible for planning,
design, construction, operation and maintenance of the distribution system up to 33 kV
voltage level. It is also responsible for consumer services providing new connections, meter
reading and billing and revenue collection. DCS is providing its services to the consumers
through two Departments, five Regional Offices, thirty-four Distribution Centers and thirty
Branch Offices spread throughout the integrated system of NEA grid. During the FY
2004/05, the total internal energy sale was 1853.69 GWh, which accounted for 94.36% of
the total sales. The total energy sale during the year was 1964.39 GWh. This is an increase
of 194.11 GWh over the previous fiscal year@s figure. Due to unfavorable situation
prevailing within the country, meter reading of about 100 thousand consumers could not be
done. Approximate sold energy to such consumers is estimated around 45 millions units.
The revenue for FY 2004/05 was Rs. 13389.00 million, which is an increase of 6.72% over
the previous fiscal year@s figure. The total number of consumers at the end of fiscal year
2004/05 was 1159855, an increase of 10.05% over the previous year. Fiscal year 2004/05
has yet again registered continued rise in the number of consumers within the NEA system.
The following chart represents the growth of consumers in domestic and other sectors in
fiscal year 2004/ 05 and preceding years. Since this business group covers almost the entire
consumer services under NEA, several regional offices as well as supporting departments

help run the day to day activities of the business group.
Distribution Centers

In continuation of its reform process, NEA has transformed additional fourteen branch
offices into Distribution Centers in fiscal year 2004/05. This has led to the implementation of
profit center strategy to thirty four of its distribution branch offices which are running more
effectively on a semiautonomous model. The Distribution Centers are evaluated for each
Performance Audit Period (PAP) on a half-yearly basis. The performance evaluation of
twenty Distribution Centers for the second Performance Audit Period was carried out in last
fiscal year and the draft report is currently under review. The result of some centers made
overwhelming good results while some have difficulty of achieving the benchmark,

Technical Services and Commercial Department

This Department has been fully responsible for programming of the TOD energy meters and
it is also helping in downloading and analyzing data of TOD energy meters. This group
prepared a Project Preparatory Report identifying the potential RE schemes and other
components for power system improvement for the proposed Rural Electrification and
Renewable Energy Project (Ninth Power Project), which is expected to be financed by Asian
Development Bank (ADB). ADB has already approved the Technical Assistance for the
Project and the Consultants are expected to arrive in Kathmandu by August 2005 to finalize
the formulation of programs for the Project. Similarly, the department proposed a Draft
Distribution Code to facilitate regulation of distribution system in the present scenario of
multiplayer participation in power distribution system and circulated it for comments and
suggestions before preparing the final report. The Department is also engaged in the
execution of reinforcement of the following sixteen distribution substations under three
packages.

Package A:

Mahendranagar, Dhangadhi, Gularia and Nepalgunj

Package B:

Chandragadhi, Damak, Rajbiraj, Dnankuta, Udipur and Baglung

Package C:

Kalaiya, Gaur, Harsaha, Malangawa, Haripur and Jaleshwar.

Altogether, 10 numbers of 6/8 MVA 33/11 kV power transformers are being added under
this program. It will increase the power distribution capacity of the existing overloaded
distribution substations and enhance the reliability of power supply in these areas. The
contracts for the above works have already been awarded. The construction works have
also commenced. The substation equipments are arriving at site and the works are
scheduled to be completed by April 2006. Some of the noteworthy projects operating under
this group are:

Distribution Profit Center Project

A consultant for this project has already submitted draft inception report, which was
reviewed by the project steering committee. The steering committee finally recommended
the performance management indicators.

Computerized Billing Project

The Computerized Billing Project is being implemented to help maintain accurate records of
consumers, meters and revenue accounting, reduce non-technical losses and account
receivables and expedite reporting. It will also help in reducing operational expenses and
improve NEA@s relationship with the consumers. Its objective is to introduce a common
system throughout NEA for improved billing and revenue collection processes in a modern,
efficient and cost effective manner. Under this project, an appropriate computerized billing
system will be selected and implemented in 20 large branch offices within the year 2006. In

the remaining branch offices NEA will implement it gradually. The tender for procurement of
the Billing System is in final stage and testing of the system in Pilot Branch is expected to
be completed by the end of 2005.

Other Major System Reinforcement works

In Biratnagar area, a new 10/13.3/16.6 MVA 33/11 kV substation is being constructed at
Tanki Sinwari and will be linked with 132 kV Duhabi Nepal Electricity Authority, Fiscal Year
2004/05 - A Year in Review S/S by a 33 kV double circuit transmission line. The proposed
33 kV transmission line linking 132 kV Duhabi Substation and 33 kV Tanki Sinwari
substation is 6.5 km long. All electrical/civil drawings have been already approved and the
work is under progress. All the electrical components like power transformer, station
transformer, 33 kV control and relay panel, isolators, 11 kV VCB etc. have been already
delivered to the site by the contractor. The construction of control building is in full swing.
Foundation work for equipment installation is complete and steel structures are
subsequently erected while power and station transformer are already mounted. The
construction work of Tanki Sinuwari S/S was scheduled to be completed by June 1, 2005.
But due to some unavoidable factors the project work is likely to be delayed by some
months. Similarly, the proposed erection of 33 kV transmission line with its tendering
process in matured stage is likely to be completed within the fiscal year 2062/63. Similarly,
under Tanahu Branch Office, a 6/8 MVA, 33/11 kV substation at Dumre will be added. Under
this contract one 33/11kV, 6/8 MVA power transformer will be installed in place of 33/11kV,
1.5 MVA transformer at Dumre substation and a new control building with five 11 kV
outgoing feeder will be constructed. At Anbu S/S, 33 kV VCB for line and 2X2 MVA power
transformers will be added and all of the old 12 kV switchgear panels will be replaced by
new ones. Construction work is expected to be complete by fiscal year 2005/06. The total
cost of the work excluding taxes is about NRs. 45 million.

Other Initiatives

NEA@s high level executive visited and interacted with large consumers in Biratnagar,
Birgunj and Kathmandu. NEA assured the top-level management of the industrial and
business entities to improve the power quality and executed:

a) the installation of capacitor banks in Biratnagar area

b) the installation of capacitor banks in Birgunj area Collecting dues for the street lighting
was very important to NEA management. Besides the above initiatives, NEA has persuaded
and received 210 million rupees out of the outstanding dues of the street lighting from Local
Development Ministry.

Officiating General Manager

०)
dim

[4

tthe

Mr. M. L. Shrestha Mr. R. C. Pandey Mr. S. K. Pradhan
Director Director Director
SHP Rural Community Rural RE Distribution System
Electrification Department Electrification Department Reinforcement Project

The Electrification group was established in the dire need for a separate entity to coordinate
the substantial rise in planned financial investments in the expansion, reinforcement and
management of rural distribution systems. This group is responsible for development of
distribution network (up to 33 kV); construction, operation and maintenance of distributed
o.-grid small hydro generations and associated networks as well as for management of rural
distribution systems through community participations. ADB and OPEC loan assisted Rural
Electrification, Distribution and Transmission Project, headed by Director; is entrusted to
coordinate different five program components namely, Rural Electrification and Distribution
System Reinforcement, Transmission Line, Computerized Billing, Distribution Profit Center
and Fixed Assets Revaluation. One of the challenging tasks in community Rural
Electrification is screening of the applications, as the allocated funds are limited.

CRED PROGRESS TILL JUNE, Under the @community based rural electrification®

2005 scheme altogether 323 communities have applied for
Up to June 2005 altogether 323 generation, electrification and distribution schemes till
REC@s have applied for generation, June 2005. 20 % participation fund amounting to NRs.
electri.cation and 195 million has been received from applicants
distribution management under the registered under community based rural electrification
scheme. The details of Electric that requires an 80% matching fund of NRs. 780
Distribution Institution million. The proposed scheme includes construction of 1
Under CBRE, CBOM and CBG No. of 3 MVA, 33/11 kV substation, 2184.5 kMs of
scheme are as follows. primary and secondary distribution lines, and 418 Nos.
CBRE Scheme : of distribution transformers. These schemes will benefit
20 % Participation Recorded, 11२5 121,129 households from 77 VDCs of 33 districts.

195 Million Similarly, 190 applications from 37 districts have been
80% Matching Fund Required, 11२5 received under the community based rural operation
780 Million and maintenance scheme and the screening process is
Line length ( HT/LT) 2184.5 km under process. 12 Nos. of communities have already
Bene.ciary House Hold 1,21,129 been given the responsibility in first lot for management
No of Distribution Transformers of community based schemes. They are performing
418 satisfactorily till now. In contrary to the thrust in

3 MVA, 33/11 Kv Substation 1 nos community based rural electrification scheme and
Application Registered 130 community based operation and maintenance scheme,
RECs in Implementation 72 only three applications are received for community
Coverage Districts 33 based generation schemes. In this year many of the
VDC Coverage 277 development activities under this group are being
CBOM Scheme: affected by the insurgency. Construction of two small
Application Registered 190 hydropower projects in Humla and Mugu districts have
RECs in Implementation 12 been delayed further by two years. Similarly, the
Coverage Districts 37 construction works for various rural electrification

CBG Scheme: projects have also been delayed. A serious set back has
Application Registered 3 been experienced in Kailali Kanchanpur RE project,

Abbreviation: where the main Danish contractor has stopped the site

CBOM : Community Based works since March 2005 citing security reasons. Efforts

Operation & Maintenance for alternative measures are under way for continuation
CBRE : Community Based Rural of the suspended work. Some of the small hydro
Electri.cation construction and rural electrification schemes are being
CBG : Community Based affected by the insurgency. As a result few projects
Generation have been delayed by two to three years. A number of
REC@s : Rural Electric small hydropower plants and substations have been
Communities destroyed in this year also. All the plants except

Bhojpur have already been put into partial operation.
Two small hydro plants and more than ten sub
transmission line construction projects are under way.
These sub transmission line projects will help to
connect many isolated rural small hydro plants to the
main grid.

Sindhu Dolkha Distribution Line Extension Project

After completion of this project, about 50,000 households and small scale industries in the
project area will get direct benefit. The major scope of the project includes:

@ Construction of 82 km of 33 kV, 200 km of 11 kV and 460 km of LV line

@ Installation of 278 Nos. of distribution transformers

@® Construction of 4 Nos. of 33/11 kV sub-stations

Till now two number of distribution substations and network expansion with 52 km of 33 kV
line, 172 km of 11 kV line, 340 km of LV lines and 168 nos of distribution transformers have
been completed. Funded by His Majesty@s Government of Nepal (HMGN), the project is
estimated to cost Rs. 40 million. This project is expected to be completed by FY 2006/07.

Distribution and Rural Electrification Project

This project is aimed for rural electrification and distribution system reinforcement in
Dhading, Nuwakot, Lalitpur, Bhaktapur and Kavrepalanchowk districts. This project is
funded by International Development Association (IDA) of the World Bank under Power
Development Project. About 16,920 consumers will be benefited from this reinforcement
work. The procurement of material and equipment is being made through several lots and
packages. Contract agreement has already been made for supply of PSC poles. Tenders
called for other packages are under evaluation. This project is scheduled for completion by
FY 2008/09.

Kailali Kanchanpur Rural Electrification Project

The project was started in 1999 (2056/057) with DKK 66.3 million grant assistance of
Danish Government and Rs. 669 million from HMG/N and NEA. The project will electrify

33 VDCs and two municipalities of Kailali and Kanchnapur districts. About 64,000
households will benefit from this project. It is expected to be completed in 2007 (2063/64).
Construction of three numbers of 3 MVA, 33/11 kV substations at Lamki, Attariya and
Lalitpur have been completed. Similarly, construction of 180 kms of 11 kV line and 550 kMs
of low voltage lines in 124 load centers had been completed, which represents fifty percent
of the envisaged task. Citing security reasons, the Danish contractor has suspended the
works since March 21, 2005, as a result of which 50% of the project works need yet to be
completed. Considering this situation, alternative arrangements have been made to carry
out implementation of the remaining works within current fiscal year. One of the specialties
of this project is that the community based cooperative will take responsibility of the
operation and maintenance. After completion of the project, load center based users@®
cooperatives will take over the responsibility of operation and maintenance of low voltage
lines and distribution transformers. Cooperative formation works have been assigned to a

Non Governmental Organization (NGO).

Rural Electrification and Distribution System Reinforcement Project

Progress made so far includes acquisition of land for 14 new substation sites. The total
procurement is divided into 11 lots and 21 packages. Out of which, contracts for 8 lots and
12 packages have been awarded. Delivery of some materials is in final stage. Tenders have
been called for installation of distribution system. The field construction works are expected
to be commenced from the next fiscal year. Civil works like construction of boundary walls
for new substation sites and construction of warehouses at various places have been
completed this fiscal year. Tenders for sta. quarter construction for various substation sites
are under process. Funded by Asian Development Bank, His Majesty@s Government of
Nepal and Nepal Electricity Authority, this project is expected to be completed by FY
2007/08 at an estimated cost of US$ 52.3 millions.

r. B. रि. Regmi
Officiating General Manager

r

Mr. S. C. Jha Mr. B. K. Pathak Mr. T. R. Pandey Mr. S. S. Rajbhandari
Director Director Director Director
Environment & Social Project Development Training Center Soil, Rock & Concrete

Studies Department Department 9 Laboratory

The Engineering Services Business Group is responsible for various level of engineering
studies and design of power projects. It has nearly two decades of experience in design and
construction supervision of a number of hydropower plants with capacities up to 144 MW. It
comprises of four departments, namely, Project Development Dept., Soil Rock and Concrete
Laboratory, NEA Training Centre and Environment & Social Studies Dept. The field of
expertise offered by this business group also includes Electro-Mechanical Services, which
also consists of a concrete pole plant and a central workshop. To ensure its efficient
functioning, it has a steering committee headed by the General Manager Engineering
Services Business group.

The directors from all of the
four Departments are
members of the committee.
The services provided by
this business group include
all aspects of hydropower
development ranging from
project investigation and
master plan studies to
construction supervision
and management of
hydropower projects
including detailed
engineering studies. During
the fiscal year 2004/2005,
Department of Environment
and Social Studies (ESSD)
of this group completed
Environment Impact
Assessment (EIA) of
Kathmandu III substation,
Khimti- Dalkebar 220 kV
transmission line Projects
and received approval from
m the Ministry. TOR and
Scoping documents of Seti-
Trisuli storage project has
been approved as well.
Studies in process of
approval of line agencies
are EIA of Upper Tamakosi
hydroelectric Project,
Gongor-Khimti 220 kV
transmission line and Upper
Hewa Khola hydroelectric
project. Public hearings for
these projects have already
been completed except for
nine VDCs in Kaski district
which is scheduled in near
future. IEE reports of
Sarada and Inuwa Khola
Small Hydro project have
been prepared.

This Department also takes care of studies conducted through local consultants like EIA of
Chamelia Hydroelectric Project, Balach -Atariya 132 kV, Kulekhani III 132 kV and IEE of
Dhading-Nuwakot 33 kV transmission line projects. Operational stage mitigation and
monitoring program for Kali Gandaki-A Project has been initiated in FY 2004/05 which will
continue for two years. A draft Operation Manual for operational stage social and
environmental management of Kali Gandaki-A Project has been prepared for the first time in
Nepal. Under Soil, Rock and Concrete Laboratory of this group, surface geological mapping,
core drilling works, construction material investigation and laboratory testing are the major

activities carried out for Upper Seti Storage Hydroelectric Project. Geological mapping has
been carried out, a total of 810 m of core drilling works and 21 numbers of test pit
excavation have been completed. All drilling machines and materials were transported
manually to the sites for which SRCL has constructed 2.5 Km. of access path in difficult
topography. Despite adverse site conditions, all field works have been carried out smoothly
in time. Other activities in which this group has been involved are:

@ Assistance in geological investigation of Gamgad Small Hydroelectric Project.

@ Assistance in geological investigation for the foundation of damaged tower no.55 of 66 kV
Atariya @ Dipayal transmission line.

@ Assistance in geological investigation of damaged tower of Chatara @ Dharan 33 kV
transmission line at Sardu Khola.

@ Laboratory testing of sediments of Upper Tama Koshi, Upper Seti Storage Hydroelectric
Project and Seti-Trishuli Storage Hydroelectric Project.

@ Strength test of concrete, rock and cement which are requested to perform by di.erent
institutions.

@® EIA study of Upper Seti Storage Hydroelectric Project.

@ EIA report on Dhalkebar @ Bhi.amode 132 kV T/L.

@ EIA report of Butwal-Sunauli 132 kV T/L.

@ IEE report of Duhabi-Biratnagar 33 kV Reinforcement Project.

NEA Training Center under this group at Kharipati, Bhaktapur is envisaged for upgrading the
professional knowledge and skills of manpower involved in the power sector. The following
table shows training Conducted in the Fiscal Year 2061/62.

These training were conducted on contract with corporate level offices of NEA. For the first
time, 4 Engineers from Department of Electricity Development (DoED) HMG have also
participated in the training conducted under this group. On the request of Promotion
Committee of NEA, Practical tests for the internal competition of different assistant level
positions were also conducted under this group for the first time in 2004/05. Project
Development Department under this business group conducted various studies in FY
2061/62.

Upper Tamakoshi Hydroelectric Project

Upper Tamakoshi Hydroelectric Project (UTKHEP) is a run-of-river type project with daily
peaking pondage. The Phase- I feasibility study was conducted during 2001-2003 by NEA.
Under grant assistant of Royal Norway Government, the consultant Norconsult AS submitted
bankable feasibility study report (Phase-II) of this project in May 2005. The head works is
located at Lamabagar VDC, Dolakha District. This project has many attractive features such
as 300 m high natural dam, good geology, high firm flow, very low sediment and minimum
environmental impact. This project will utilize 820 m gross head in order to generate
maximum output of 309 MW and average annual energy of 1737.7 GWh. According to the
Generation Expansion Plan of NEA, UTKHEP should be commissioned by 2012 AD in order to
meet the future demand of electric energy of Nepal. This project has very low specific
energy cost. The project is planned to be implemented under public-private participation.

समा पनामा आठमा ललल। Assistant
Types of Training Nan-Tech Technical Non-Tech

1 1121 411 127 21] 1471
[1 ६111 पात]

Z. Induction Training 3
(Recruited in NEA}

Environmental Impact Assessment (EIA) of the project has been carried out separately for
generation and transmission. Public hearings have been conducted on November 19, 2004
and on December 22, 2004 in Charikot, Dolkha. The EIA have identified many positive
environmental effects such as fishery resource at intake pond, land reclamation, flood
control at Lamabagar, community development, employment opportunities, district
development and improved access etc. For a project of this size, adverse impacts are
minimal and can be duly mitigated. Estimated cost of project as per the final feasibility
report is US$340 Millions including access road and transmission line. The unit price of
energy is calculated as USc.2.6/kWh.

UTKHEP is currently engaged in the following works:

1. Land acquisition along the 28km Access road between Singati and Lamabagar.

2. Evaluation of technical proposals of Package- 1contract of Access road.

3. Construction of Office building at the Power house site, Gongar.

4. Updating of hydrological and sediment logical data from the project site and their
analysis.

Other projects under study under
this business group are Upper Seti
Storage Hydroelectricity Project,
Seti Trishuli Storage Project. Beside
these this business group is also
carrying out medium sized Project
Identification Study, studies on
maintenance of existing power
plants like silt problem of Trishulli
Balancing Reservoir, Discharge
Capacity of Devighat intake and
repair works of Tinau head works.
Some additional field investigation
of Upper Modi @A® was also made
in FY 2004/5.

Project Development Department
continued sedimentation monitoring
of the Kulekhani reservoir in
2061/62. The original capacity of
the reservoir was 85.3 million m3
Her ता 4 ति Heartiearks Stte out of which total live storage was
68.25 million m>. The gross capacity
of the reservoir as per the study of
January 2005 is 62.248 million m?,
accounting to the total loss of 23.05

Mm? of reservoir volume ina period
of 23 years. The live storage is
calculated to be 55.54 Mm3 and the
dead storage 6.71 Mm?.

a न,। 1
Mr. K. P. Upadhyaya
Director
Managing Director's Secreteriat।।

?

4
Mr. S. N. Neupane
Director
Public Relation and Grievance
Management Department

Mr. L. Ghimire
Director
Internal Audit Department

NEA Board Matters

Dr. Tulsi Giri, Vice Chairman of the Council of Ministers, who is also holding the portfolio of
Ministry of Water Resources has been chairing the meetings of NEA Board of Directors since
2061/12/2 (3/15/ 2005) as ex-officio Board Chairman. Prior to this, the then Minister of State for
Water Resources, Mr. Thakur Prasad Sharma was NEA Board Chairman. Mr. Mahendra Nath
Aryal, Secretary, Ministry of Water Resources 15 the ex-officio Board member since 2061/4/29
(8/13/2005). Mr. Hemjung Gurung and Mr. Aang Gelbu Sherpa were nominated as members to
NEA Board on 5/6/2061 (9/21/2004). During FY 2004/05, the NEA Board meetings were held
23 times. Some important by laws on Generation, Transmission & System Operation and
Distribution & Consumers Services and the NEA Grid Code were adopted and the Policy for
purchasing power from Bio-mass and Wind Power plants was approved. NEA Corporate
Structure also underwent a minor revision.

Internal Audit Department

The Internal Audit Department carries out financial, technical and energy audit of NEA offices.
It has the target to cover all of NEA@s offices and complete internal audit before the
commencement of final audit. To increase the internal audit coverage, unit offices have been
established in 5 development regions. These regional offices will audit all the NEA offices
falling under them. Activities up to last Poush have already been audited. Coverage is around 85

percent of total budget centers. Remaining activities are expected to be audited by the end of
Aswin 2062. The Department also conducts training for its sta. on Financial Audit, Technical
Audit and Energy Audit to enhance their professional capabilities.

Public Relation and Grievance Management Department

To address public grievances on a timely manner, NEA established a new department named
Public Relation and Grievance Management Department. This department was formed to work
as a focal point of NEA to deal with public complaints and forward the same to NEA@s core-
business units for necessary action. This department sends information and reports on NEA@s
activities to the concerned authorities on a regular basis. During FY 2004/05, the department
received altogether 29 complaints from the public. Fifteen of those complaints have already been
addressed while the remaining complaints are being processed for necessary action.

Mr. Dipak P. Upadhyaya
Officiating Deputy Managing Director

Mr. U. D. Bhatta

Director Mr. S. B. Shrestha Mr. R. M. Sulpya
Information Technolo Director Director
gy Corporate Planning Departent Power Trade Department
Department। 2. .

Mr. V. B. Singh Mr. J. M. Pradhan
Chief Chief
Monitoring Department System Planning Department

To cope with the increasing demand for electricity, proper short and long term generation
and transmission planning have become a crucial aspect in NEA@s investment decisions.

The planning, monitoring and information technology wing of NEA periodically evaluates and

monitors on the development projects executed by NEA for their timely and successful
completion.

This office is supported by five departments namely System Planning Department,
Information Technology Department, Monitoring Department, Corporate Planning
Department and Power Trade Department.

System Planning Department

The System Planning Department is mandated by the NEA Board to formulate NEA@s long-
term investment plans on generation and transmission. During the year under review, the
Department brought forth three important documents on:

@ Load Forecast
@ Generation Expansion Plan and
@ Transmission Expansion Plan.

All of these reports formed the basis for formulating NEA's Corporate Development Plan FY
2005/06 @ 2009/10. The department also played a crucial role to conduct on-the-job
training on Generation and Transmission Planning for NEA planning engineers through
NEA@s training center.

Corporate Planning Department
The Corporate Planning Department, undertook the following major works during the fiscal
year 2004/05:

@ Preparation of Annual Corporate Development Plan (CDP).

@ Formulation of Annual Development Budget.

@ Preparation of proposals for foreign assistance.

@ Obtaining licenses from HMG/N for its development initiatives.

@ Preparation of Action Plan for HMG/N's Budget Policies related to NEA.

@ Preparation of Medium Term Expenditure Framework (MTEF) paper for the fourth MTEF
(FY 2005/06 - 2007/08).

@ Preparation of Business Plan on Rural Electrification for the National Planning
Commission.

@ Preparation of Demand Side Management Policy.

In addition, NEA obtained nine new licenses from HMG/N for development works. Out of the
nine new licenses; three were for the distribution survey, two for the transmission survey
and the remaining four were for the generation survey.

In the capacity building measures for NEA staff, six senior NEA officials took part in various
trainings, workshops, seminars and partnership programs under the USAID sponsored
South Asia Regional Initiative/Energy (SARI/E) program in the region. Similarly, two senior
sta. went to Argonne National Laboratory in the USA for the training on Generation Planning
Models sponsored by USAID funded Private Sector Hydropower Development Project of
HMG/N.

Power Trade Department

Besides negotiating, conducting and administrating PPA with IPPs, this Department also
coordinates the cross border power exchange and trade with India and acts as NEA@s nodal
point in order to deal with the Power Trading Corporation (PTC) of India for the sale of
seasonal surplus energy on a @as-and-when available@® basis. During FY 2004/05, this
Department concluded PPAs with Gautam Budha Hydropower (P) Ltd (Sisne Khola Small
Hydropower Project, 750 kW), East Nepal Development Endeavour (P) Ltd (Upper

Mai Khola Small Hydropower Project, 3.1 MW) and Aadishakti Power Development (P) Ltd
(Tadi Khola Small Hydropower Project, 970 kW). Currently, a number of PPA proposals are
under review. The Department also finalized the commercial operation date (COD) of three
small hydropower projects during FY 2004/05. Sanima Hydropower Company, successfully
generated and supplied electricity to the national grid from the Sunkoshi Hydropower
Project (2.6 MW), with effect from Chaitra 11, 2061. Similarly, Rairang Hydropower
Development Company (P) Ltd (Rairang Khola Small Hydropower Project, 500 kW) and
Alliance Power Nepal (P) Ltd (Chaku Khola Small Hydropower Project, 1.5 MW) have also
successfully supplied electricity to the national grid starting Mangsir 01, 2061 and Asadh 01,
2062 respectively. This Department also provides support to NEA@s Corporate Finance
Department in processing the invoices of the IPPs. Currently, the Department is drafting a
model Power Purchase Agreement for power purchase from IPPs up to 10 MW.

Monitoring Department

This Department collects and evaluates monthly, quarterly and annual progress reports of
different projects implemented by NEA. It conducts internal review meeting of different
projects and participates in the Ministry level quarterly progress review meeting. It also acts
as the Secretariat to the Petition Committee of NEA as provisioned in the Electricity Loss
and Electricity Distribution by-laws. As the nodal officer of NEA, the Department also takes
responsibility for collecting the progress report and reporting to HMG@s concerned
authorities regarding delivery of services effectively by monitoring the progress reported by
NEA@s departmental and district level nodal officers. Apart from the above tasks, this
department also co-ordinates with and reports to various Government Agencies, such as the
Ministry of Water Resources, National Planning Commission etc. regarding the progress of
NEA executed projects.

Information Technology Department

The Information Technology Department in FY 2004/05 developed a number of application
software for organizational efficiency such as Board minute tracking system, sales revenue
& collection system, document control system etc. These application systems are in use in
the respective offices and the NEA intranet site disseminates the information gathered from
these applications software in a graphical format. The Computerized Accounting and
Inventory System (CAIS) was implemented in six more budget centers and more than 56
sta. were trained in the use of the software.

The total number of installation of CAIS in NEA now stands at 97, more than fifty network
nodes were added to the NEA corporate office local area network (LAN) in FY 2004/05. The
department also tested the use of V.24 interface of the fiber network provided by the Load

Dispatch Center. This network will augment the existing Virtual Private Network (VPN)
service and the dial in service provided by the Department for remote offices. NEA intranet
site was improved with the inclusion of important facilities like telephone inquiry system,
library book inquiry system, document dispatch system etc. Development of a strong
intranet system will enable NEA to share information, monitor performance, establish
accountability, maintain transparency, improve efficiency and ultimately will pave a way for
the establishment of a virtual office. Most of the information about NEA activities can be
downloaded from the NEA website: www.nea.org.np

at ea

Mr. U. K. Shrestha
Deputy Managing Director

3 . ' 9 7: 8 g ams,

Mr. L. M. Maskey Mr. R. P. Adhikari Mr. D. Poudyal Mr. B. K. Dhakal
Director Director Director Director
Finance & Accounts General Services Corporate Finance Human Resources
Department Department Department Department

The office of Finance and Administration looks after the overall activities of the financial
management, central accounts, the human resources development and the general
administration within NEA. This office takes care of the activities in the corporate financing
and human resources planning. Assisted by directors of Corporate Finance Department,
Finance and Accounts Department, Human Resources Department, General Administration
Department, this office is headed by Deputy Managing Director.

Corporate Finance Department

Total NEA sales in Nepal grew by 11.7 percent to reach a figure of 1853.7 GWh in FY
2004/05. Export to India however felt a setback with only 110.7 GWh of export. This is 21.6
percent less than previous year@s figure. The total NEA sales however grew by 9.08 percent
to reach a figure of 1964.4 GWh. Income from other sources; such as surcharge, bank
interest, lease rent, penalty in contracts etc. in FY 2004/05 was Rs. 566 million. This is 4.3
percent of the total gross revenue and 15.6 percent less compared to previous year@s
figure. Rebate to consumers amounted to Rs. 280 million and represents

2 percent of the gross income. Total income after rebate in FY 2004/05 was Rs. 13.39 In FY
2004/05, total expenditure stood at Rs. 15.25 billion, an increment of 12.2 percent over the
previous year@s figure. Power purchase expenditure increased by 3.7 percent, mainly due

to additional import of 100 GWh of energy in the eastern region, and amounted to Rs. 5.62
billion. Interest expenses amounted to Rs. 3.32 billion which is an increase of 10.6 percent
over the previous year@s figure. The royalty expenses when compared to previous year@s
figure increased by 40 percent. Operation and maintenance expenditure that comprises
expenses for: staff salary and perks, fuel, maintenance of machines and structures,
administrative support etc. increased by 12.4 percent and amounted to Rs. 3.61 billion.
Reasons that are attributed to increase in O & M expenditure are additional thermal
generation, increase in staff facilities, additional maintenance of infrastructures etc. In the
year 2004/05 also NEA carried on its business without increasing the tariff. During FY
2004/05, NEA suffered a net loss of about Rs. 1.91 billion. To every kWh served NEA carried
a loss of around Rs. 1.00. During FY 2004/05 price rises on various items (petroleum
products, construction materials etc.) and increase in the VAT rate worsened NEA@®s
financial position. NEA also requested HMG/N to consider reducing the prevailing interest
rate in view of the fact that US$ exchange rate vis-@-vis NRs. grew by only 3.4 percent
during the past 10 years and the fact that the prevailing interest rate in the market is
modest. The reduction in interest rate obviously reduces the pressure for tariff increment
requirement.

In FY 2004/05 NEA faced the challenge of managing its cash requirement. NEA spent an
additional amount of Rs. 450 million towards the cost of foreign component in the Middle
Marsyangdi Hydroelectric Project. A total of Rs. 18.17 billion was spent against a total of
cash receipt of Rs. 18.15 billion. Cash collection during FY 2004/05 could not remain
satisfactory due to security problem prevailing in the country. During the year in review,
total cash collection from sales stood at Rs. 11.24 billion. Arrears from public sector
consumers reached Rs. 1.5 billion mainly due to outstanding dues of Municipalities whereas
the collection rate of individuals and private sector consumers remained satisfactorily at 95
percent.

NEA@s treasury management is being improved by adopting various available methods and
tools of modern financial management. From FY 2004/05, NEA started buying foreign
currency to pay power purchase bills of Bhote Koshi Power Company. Direct bank collections
are being operated effectively to generate interest income from Call and Time deposits. A
new scheme of introducing Power Bond is in the offing to finance NEA@s future projects.

For institutional strengthening, a sub-component of Nepal Power Development Project has
completed the selection process of consultants. These consultants, after appointment will
carry out the task of enhancing NEA@s capability in financial management, accounting and
auditing.

Finance and Accounts Department

NEA*s net revalued fixed asset at the end of FY 2004/05 reached NRs.58,747.50 million in
comparison to NRs.58,963.40 million as of end of FY 2003/04. Total revenue in FY 2004/05
was NRs.13389.00 million as compared to NRs.12546.10 million of FY 2003/04, which is an
increase of 6.72 percent.

Total operating expenses under generation, transmission, distribution and administration
are NRs.7362.00, NRs.240.70, NRs.1556.20 and NRs.511.60 million respectively for FY
2004/05 and NRs.6565.90, NRs.199.50, NRs.1376.10 and NRs.489.10 million respectively
for FY 2003/04. They represent an increase of 12.1, 20.7, 13.1 and 4.6 percentage
respectively, whereas the increase in total expenses was 11.4%. NEA suffered a net loss of
NRs.1915.00 million in FY 2004/05. NEA@s financial performance has not been encouraging
and is suffering a loss for the fifth year in row due to various reasons cited in this report.

In FY 2004/05, NEA invested NRs.7100.10 million in capital works and projects. Out of this,
NRs.1060.90 million comprised of HMG equity, NRs.3949.20 million as HMG loan and
NRs.2090.0 million from NEA@s internal source. NEAs total borrowing stood at NRs.4917.98
as of end of FY 2004/05. In FY 2003/04, NEA contributed a total sum of NRs.48386.91
million to the national treasury. Out of this, NRs 3324.55 million was for interest payment,
NRs.621.45 million for loan repayment, NRs 41.61 million towards corporate tax and
NRs.851.08 million as royalty. The financial audit for FY 2003/04, carried out by M/s TR
Upadhya and CO., was completed within ten months of conclusion of the fiscal year. Tax
audit for FY 2003/04 has also been completed. NEA appointed auditor to conduct the
performance audit of General Manager@s Office of the core business units and the
distribution centers for the first and third performance audit period respectively.

NEA has successfully computerized its financial accounts and inventory management system
in 97- branch offices out of the 126 operational level offices. This will help to prepare
financial accounts in due course of time and it will facilitate to complete the financial and tax
audit at stipulated time. It will help the financial reporting system of NEA and also help to
comply with the loan covenants of donor agencies. The audit qualifications of the period FY
2030/31 to 2050/51 of then Electricity Department, development Projects and Development
Committees has been cleared by 61 percent out of the total outstanding audit qualifications
in FY 2004/05.

Human Resources Department

The Human Resources Department has been entrusted with the functions of Manpower
Planning, Staffing, Training and Development, Employees Record Keeping, Staff Welfare,
Disciplinary Actions and Administrative Management. The total approved positions as of end
of FY 2004/05, is 10317; out of which 9779 positions are filled constituting 479 women staff
in different levels. During the year under review; 768 staff were appointed, 25 staff retired,
28 resigned and 52 died. Under disciplinary actions; 23 staff have been cautioned, 9 have
been debarred promotion, 6 suspended, 19 dismissed and 3 dismissed with ineligibility for
future NEA service. The recruitment process of appointing 768 permanent new staff for
Technical and Non-technical positions have been completed.

As regards promotion, 5 employees in the officer level and 95 in the assistant level have
been promoted under the 12 years time bound promotion system. Similarly, 1378
employees have been promoted in different levels based on performance evaluation. A new
Personnel Management Software has been developed for efficient record keeping of
employees and enhancing the existing Personnel Data Bank (PDB).

Staff Recrumtment FY 2004/05

Staff Promotion FY 2004/05

Non-Technical

STanaging
Dt ६८६]

CFE NL
Jechiiiual
H-11}।
Assistant Non
Level [Level Technical 2970 Pale 3263 4d]
1-5) Technical

rrand +

Job Descriptions for levels up to 8 have been revised. A new Performance Appraisal System
is being developed for levels up to 10 that incorporate performance standards for improving
quality of service delivered by both the employees as well as the organization. A total of 152
staff participated in trainings, seminars, workshops, higher studies and equipment
inspections abroad whereas 236 staff participated in trainings, seminars, workshops and
higher studies conducted by different organizations of Nepal. Similarly, 254 officer level and
974 assistant level staff received training from the NEA Training Center. Under the staff
welfare program, additional financial support has been provided to 9 employees for the

treatment of serious diseases. Similarly, under the staff welfare loan; 470 staff received
house/land purchase and construction loan, 190 staff received house maintenance loan, 240
staff received social activities loan, 287 staff received 3 months® salary loan and 6 staff
received natural disaster loan.

General Services Department

The General Services Department is responsible for general administration, legal and
arbitration, property management and procurement for NEA@s central office.

It provides all administrative support to the central office as well as ensures the security of
the premises. To support the various functions of the Department, two divisions (General
Administration and Legal & Arbitration) and two sections (Property Management and
Procurement) are presently functioning.

There were altogether 118 legal cases involving NEA in FY 2004/05. Out of this, NEA won 48
cases, lost 10 and remaining 60 cases are sub judice. Cases are related mostly to: theft of
electricity, land acquisition, staff promotion etc. Some of the disputes related to the
contracts of projects under construction are being resolved through arbitration.

Highlights of FY 2004/05

Desclpilon

Amount

Revenue:

Po
कमा
Acmirist'aticn र] 1525 [Mv -5.]
[816 ए 76४४". Expand tue iW AlAs।
Total Sales of Electie by (CW!
ss
Peak Load rlerco rected System (vi
Therna General cn iGvyh)
a

पिता

NEPAL ELECTRICITY AUTHORITY

BALANCE SHEET AS AT July 15 2005
Particular 41। 25 2002 2004 1995 1956 1557

alt
Capta and Liai lies।]। ee।। ee
Capial and Reserve।।।।।।
wore) "82159। 159765 92516। 8279

ohare Gao la . . 6
sos0.6] 4550.8] 55¢43। 8153 1889.6। 120403 15416.9। 14194.5

48201.3। 452520) a37ee.c। aid7e5। 3e7c7s। aciss7। 238243) शाहका। 174c3.2] "e5004। 134870
65347.2। 662286। o25605। s64793। 497304। कागज। 431025 35684,

14259.7। "6195। प्रत 5220.
१90] 7130। 630 540] आ

73820.2। 702960। G6217.4 33873,।। ee ee ee।।

li नग सग ll म

248658।. 2633 22785 2644।. 1920 4717

१883। 6205 2826

ता 4549. 2512.1 "414.

10664.8। 103692।. 81981) अधकषा। 6137] serra] 4786.5] 4005.0। रुट 1803.7।. 1854,
Net Currents Assets 2505.8। sore। i373] 1989 23.7। 266.7। 1687.2। 19434] वाद। 1277.
Dele-ree Expand lures (70 'sno ] 200 978,। i328] sic] aaa] era] ata] saps
02 Werte ol}

Inter Unit Balance( पि]।। 130.6 2569। 1887। 92] अगा वि।।।।।।।।।।।।।।]

"Orey siona 00 एट, 900 07] le' nal avail.

Reserve and Accumulated
Prowr

SecLred Long Tei oar

is।।

Grand Total 72426.7। 66018.7

Fited Assels BeTa7.5। 5834

[19 075 11 Pragess

—

—
mnt

Investment

Sub Total

Currant Asset

57.8
4125.3

1490
का

reenlories

Sundry Beblors and Cdher
Recenvable

Cash 3710 Bank Balance

Perpaid Advance, Loan ard
De posits

Total Currents Asset

Lass: Cuyrand Liabilities
and Provision

Sundry Crecnors and
Payables

Shad 9777

cy

Provision

Total Gurrrent Liabilities
and Provision

Ld
=
=

~ =n
पा

INCOME STATEMENT

For the F.¥. 15 July 2005
Particulars। zoos। 2004। 2003। 2002। 2001। 2000। 1999। 1998। 1997। 1995

598 aE
Profit from operation [3,025.60। 2437.6
ar

Prof lesson foreign 59.1 271.4। १ Ol। 000 Oo 0.04
Exchange

Deferred revenue 350d) 420.1 4114 512.5 46.90) 440.30 236.81 270.10 148.70 704 4¢
expenditure wrilen of

sub total पिरति। S056। Ske?। Bede। 2794.40 2334.40। 2204.00। 1,995.10। 1,563.71

Prof! less from operation 1,844। -11412 0.। -12094] -295.50] $7320) 247) 220] 105050) 871
Including nterest+Dasp

"S170, -1 7660 भए.

छा। T7234
146.30 rae,

28.80

Prigr years ad uslneat (net) agzo] 29160] -z1e7c। 79.29
Net profit! loss before tax ~1,486.1। ass। 717.4

756.50। 4167.6
Pravig a "or Tax। न-। पा। बु] बा 0 छाक। 2536
Net profit! loss after tax "1,760.3। -1953.7। -3607

173,70
1.027.680

TOT.40। 698.5
S40.40। नत रर

Balar ce [ला asper las Safa। -" Bsa & 270.प 1 5.7

accourl

Total profil Available for 5.3701। -3.455.2 7 -1,674.9 298.9] 1178.60] 1,250 80। 1,085.40
appropriaban

rsurance 'und 20.1। 20.00 20.29

Profit loss transferred to $4752। -1,694.9 278.9। 1,759.60। 1,250.60
balance sheet

1.20180। 1047.80] 360.4f

1290.60। 1056.30। 116-.50

४०.09 20.00 20.00

1,027.80। 340.4

Basis of Accounting
The financial statements are prepared as per Nepal Accounting Standards except where
stated otherwise, and presentational requirement of the Company Act- 2053. The

statements have been prepared on the basis of historical cost convention, modified to
include the effect of revaluation of fixed assets as per the generally accepted accounting
principles, which are compatible with certain International Accounting Standards, to the
extent applicable.

Revenue from Sale of Electricity

i. Revenue from sale of electricity is recognized at the time of raising of bills on the
consumers, as

per the billing cycle. Revenue from the billing cycle dated upto 31 Ashad has been accrued
taking average rates. Revenue from sale of electricity is shown net of rebate.

ii. Accounting of rebate and surcharge for delayed payments and liquidated damages,
obligations has been done on cash basis.

Income from Other Services

i. Revenue from other services is recognized on cash basis.

ii. Interest on investments in call and time deposits is recognized on accrual basis.

iii. Dividend on investment in shares is recognized at the time of receipts.

iv. Revenue from services provided by Engineering Services are accounted for on cash basis
on the completion of the relevant job.

Fixed Assets

i. Fixed assets (other than those identified in para (ii) below, which continue to be stated at
their historical cost) are stated at their revalued figures less accumulated depreciation.
However, transmission lines below 33 KV have been considered for annual revaluation only
from 2048-49 (1991-92) by applying the multiplying factor as applied to other revalued
assets.

ii. The following assets are stated at their historical cost less accumulated depreciation

a) Solar Power Plant

b) Meter and Metering Equipment

c) Consumer Service

d) Public Lighting

e) Tools and Instruments

f) Vehicle and Mobile Plant

g) Furniture and Fixtures

h) Office Equipment

i) Miscellaneous Properties

iii. The cost of acquisition, construction/erection includes interest on loans related to the
period of construction/erection up to the date of completion of the project, along with other
incidental costs and charges attributable to bringing the asset to its working condition for its
intended use. The incidental costs include proportionate overheads relating to the following
offices at the rates given below:

(a) Planning 50%

(b) Distribution and Consumer 10%

(c) Development 50%

(d) Finance and Administration 10%

iv. Liabilities in foreign currencies relating to acquisition of fixed assets are carried in the
books at the exchange rates prevailing as on the date of incurring the said liabilities and
exchange loss/ gain arising there from, is adjusted to the cost of respective fixed assets on
actual disbursement of the respective loans.

v. Liabilities on foreign currency loans, which remained unpaid at the year-end, are
converted at the year-end exchange rates. The profit/loss arising there from is adjusted to
the Exchange Variation Reserve and losses in excess of the balance in this account are
charged to the Income Statement. During the year, Rs.59.152 million of loss on foreign

exchange is charged to the Income Statement.

Revaluation of Fixed Assets

(1) A major portion of fixed assets was revalued during the financial year 1988/89 and
1989/90, using the @net replacement cost approach® on the basis of reports of
independent valuers. The assets revalued, together with subsequent additions made
thereon, are subject to an annual revaluation by adopting a single multiplying factor
computed by using the average index numbers of inflation provided by the World Bank for
the financial years 2003 and 2004 for foreign and local component in the ratio 80:20.
Independent valuers are not used for annual revaluation of fixed assets.

(ii) The multiplying factor computed for the year and applied to the assets for annual
revaluation is 2.85% (previous year 0.63%).

(iii) Revaluation factor is not applied in the case of fixed assets whose value has already
been reduced to Rs. 1 under the historical cost convention to the extent identified. However,
assets under distribution lines have been revalued irrespective of the net book value.

Depreciation
(i) Depreciation is provided on straight-line method on all fixed assets, at the following

rates:

Revalued Cost Basis Historical cost Basis

[[1) Buildings TO 2 OA 2 OA:

(21 Jivulee Tlecleig लिजा पाद बी रो फिल] पि
[शा] Iydro Llectric Plant & Machinery id YA S.A:
te Internal Cumbustist ooo plant छ न 1
5! 1 Pr
maclinesy, Transmission Tines ि KY 1a2 हि 7
and abuve
(uy हि डा Putes (34 KY} AON 4: OOO ty
(hi) Transmission Substations V0: OA:
} sy Lijcl 1५
tin Dhistribulicw Svehan tui luliog Polis 00 ५.- ७10 4. उ sem] Oe

छा] पि जारि] 111 सा

LL]
पाउ] Power

CRUST

तन्ना
—- -

—
प्रा
बना

नए [एप हट Metonmog Euyuipinent TTY

खि

एज 514 एटा ४102

—
—
. .

Gal

Vehicles, doole and बारा जाला" .

नन
—
—_

. .

Urniture ad 11510755.

i
[<a] Cilbicu [aytupinent

Miscellaneous Properties

13.2

oo.
—
ft

—

SOLDIYE,

Abapplivable rales tor cull Ab applicable rides toe hall

"Whine duo a छि your

सान
e
—
पण ना

'dT 1

(ii) The applicable depreciation rate on building on revaluation basis is applied on 90% of
the value of the building.

(iii) On assets sold/scrapped etc. during the year, depreciation is not provided up to the
date of sale/discard/disposal.

(iv) Depreciation on changes in value of fixed assets due to impact of revaluation is
provided retrospectively.

(v) An amount of Rs 930.269 million (previous year Rs 971.416 million) equivalent to the
additional charge for depreciation, arising due to revaluation of fixed assets is transferred
from the Revaluation Reserve to the Income Statement and not adjusted against retained
earnings as per IAS 16.

Contributions from Consumer/Local Authorities
Contributions received from the consumers/local authorities against fixed assets
installed/commissioned by NEA, were treated as capital reserve and these were not

deducted from the cost of respective fixed assets up to 2053-54 (1996/97). With effect from
2054-55 (1997/98) such contributions are netted off from the respective fixed assets. An
amount aggregating to Rs. 181.06 million on account of consumer contribution pertaining to
earlier years has not been adjusted and disclosed in the financial statements as Capital
Reserve.

Investments
Investments are valued at cost.

Inventories
Inventories are valued at cost, using the weighted average method.

Accounts Receivable
Accounts receivable are stated at book values, less provision as may be considered
appropriate by the management.

Deferred Revenue Expenditure

Certain expenditure incurred on training, investigation, survey, feasibility studies, of
infrastructure projects and major overhauling etc., which are expected to generate benefits
over a period of time, are treated as deferred revenue expenditure and written off over a
period of five years, including the year in which the said expenditure are incurred.

Employees Benefits

Provision for Pension and Gratuity is made on adhoc basis. Such expenses are accounted for
on cash basis and provisions made in earlier years against the above expenses heads are
being retained in the accounts. However, Rs 475.798 million (previous year Rs. 461.863
million) is provided by the management on an estimated basis. Liability on account of
accumulated home and sick leave aggregating to Rs 142.208 million (previous year Rs
123.658) has been provided for on an estimated basis to cover the liability as at Ashad 31,
2061. Liability on account of medical reimbursement continues to be accounted for on cash
basis which is not in accordance with Nepal Accounting Standards.

Insurance Fund

Insurance fund is created by setting aside a sum of Rs. 20 million every year irrespective of
profit/loss for the year to cover any loss of fixed assets, in case of any eventuality.
However, interest accruing on the above fund is credited to Income Statement, as per
consistent practice. Rs 260 million (previous year Rs 240 million) earmarked in lieu of
insurance fund has been utilized by NEA during the year and the amount set aside every
year is not funded on the balance sheet date. This fund is not created in the current year as
NEA has incurred loss.

Prior year@s figures/Regrouping
Previous year@s figures have been reclassified / regrouped, where necessary, to make them
comparable with current year@s figures.

TARIFF RATES

(Effective frarn the Billing of September 17, 2001)

his। DOMESTIC CONSUMERS
a Minimum Wonthly Charge: METER CAPACITY Minimum Charge (HRs.}
Z
—
le es
a
- _
- __

TEMPLES

r 8 a6. 5.10 96r जा

[11
पे
पिक
har

C3

=>
६०
i
एः

cr
20
im
m
="
c
Gt
=x
=
wn

T

With Meler Rs. 5.10 per unil

Without Meter Rs. 1200.00 per 7५0)।

EMPORARY SUPPLY

Erengy Charge as. 2.50 per ure

COMMUNITY WHOLESALE CONSUMER

Energy Charge Rs. 3.40 per unil

INDUSTRIAL Monthly Demand Charge

पिडा क)

Energy Charge
(Rsiunit}

Low Va tage (400290 wa।)
45 00
10 00

S25
B.Ed

(a) Rura aid Cottage
[o) otall Industy

Med uti vallage [11 5५) 1810.00 5.40

Med um wollage [2557 180.00 5.80)

a

H gh wallage (55 «vac abowa} 175.00 4.60

; COMMERCIAL

225.00
216.00
216.00

Low voltage (400/230 volt} To

Medium wollage (11 kV}

Medium vollage [33 7५) 7.4

fo [। >।

=
3
ri
o
=:
=।
ro
"1
c
a

on-

Low voltage [400/290 va 1) 750.00 a20

Mad um voltage [दी 150.0 750

780.00 शि.

=

&। Mead एना voltage [33 ५,

Energy (in GWh)

0

006° 2008 2007
'MeEnergy (GWh गे
« Paak (MW

Fo Hs)

LOAD FORECAST

mo 21

4481।

॥ q a. .
2012 i aod

Fiscal Year।। ]
ets 2018 AVF

14

"20Te

md

1

2000
= {apo
- 1600
- 1400
- 1200
- 1000
- 800
- 600
- 400

— 200

Peak fin MW}