Commencement of Testing and Commissioning of Unit 1 and 2 of 1020 MW Punatsangchhu – II Hydroelectric Project, Bjimthangka, Wangdue on August 15, 2024

P II tariff likely to be Nu 5.25 per unit with Nu 22.8 bn annual revenue

According to a reliable source the tariff for the 1,020 MW Punatsangchu II project is likely to be Nu 5.25 per unit.

A tariff negotiation team was sent from Bhutan to Delhi with discussions under way on Friday.

Initially Bhutan wanted Nu 5.85 per unit while India offered Nu 4.80 per unit. However, after negotiations both sides seem to have settled for Nu 5.25 per unit.

Given that the project is expected to generate 4,357 million units per year the total revenue expected is Nu 22.874 billion a year.

The tariff is derived on the cost plus model where the cost of construction and cost of financing is taken into account. What also has to be taken into account is the return on equity.

Simply put the tariff should cover the cost of construction, cost of finance and also give some return.

Given that the P-II project is financed at 30 percent grant and 70 percent loan there is a higher financing cost, which means a higher tariff rate.

While calculating the tariff rate Bhutan’s Royalty Power or free power of 15% also has to be taken into account. This simply means the tariff is calculated on the remaining 85%.

Here it is believed the Indian side asked for the Royalty Power to be calculated at 13% instead of 15% as the tariff was coming higher.

The project completion cost is around Nu 94 billion.

Seepage

Meanwhile, when asked about the seepage from the power house ceiling delaying the commissioning of the P II project during the monthly meet-the-press the Minister for Energy and Natural Resources Gem Tshering said, that such seepage issues are not uncommon in underground powerhouses, particularly during the initial stages of charging the water conductor system.

In the case of Punatsangchu II, since there were some risks of humid conditions and water falling on the electro-mechanical equipment and control panels, further testing of the units was suspended temporarily until the false ceiling of the machine hall was completed (mainly to channelize the seepages).

Following the decision of the 18th Technical Group (TG) meeting held on September 5, 2024, the dewatering of water-conducting systems began on September 7, 2024, and was completed by October 14, 2024.

On dewatering of the water-conducting system, the seepages have reduced from 1200 liters per minute to 650 liters per minute.

The TG carried out the inspection of the water-conducting system on October 17, 2024, and met on October 18, 2024, at the project site.

While no major seepage sources were identified, the TG decided to carry out additional grouting at the surge shaft bottom and penetron painting of the surge shaft and a portion of the Head Race Tunnel.

The installation of the false ceiling works is progressing as per schedule. The implementation of the remedial measures in the surge shaft bottom and headrace tunnel is scheduled to be completed at around the same time i.e., by December 2024.

Thereafter, the water-conducting system will be charged once again and the units will be commissioned.

The minister claimed it is not practical to estimate the generation and revenue losses, as the units had not started generation when the seepage issues were detected in the powerhouse. He said it is important to ensure that seepages are adequately remedied before the commissioning of the units.

Furthermore, Lyonpo said it is the end of the monsoon season and the river’s flow will reduce in the coming months. During the lean season, the available water will only be sufficient to operate one unit.

On former Director Technical’s allegations against WAPCOS and CWC

Recently the former Director technical of PHPA I & II and CWC member Yogindrer Sharma had come out and blamed the consultants WAPCOS and CWC for their incompetence and also ignoring warning signs and reports in case of right bank failure in P I and power house issues in P II.

He says it is a conflict of interest that the two consultants are both the consultants doing the DPR, estimates and designs and then also in the TCC and PHPA Authority as the technical experts and approving them.

Moreover, they are now heading the rectification measures in the P I right bank.

The MoENR Minister Gem Tshering said the setbacks faced by both projects have indeed been challenging, largely due to unforeseen geological surprises.

He said addressing these issues is a collective responsibility, and both governments are making every effort to complete the projects and realize their benefits, particularly for Bhutan’s energy, security and economic prosperity.

“The views expressed by the former Director Technical are his personal views, and we have no comments.”

He said under similar arrangements, there have been no problems with the other projects that have already been completed.

“Our focus remains on delivering the projects successfully, and all efforts are directed towards achieving that shared objective.”

Lyonpo said, “The issues with P II have been resolved and testing and commissioning of the units have been started. For the P 1 project, the two sides are working closely together to harmonize on a solution to complete the project.”

Lyonpo said that it would have been better if he expressed his views while in the position as now it is only the views of a retired official who has freedom of expression in a democratic country.

The Prime Minister Dasho Tshering Tobgay said both the P I and P II projects have the highest priority and they are not thinking about the past and causes of the failures, but the focus is on solving any issues as they come and completing the projects.

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