Asset Management in Public and Public Private Partnership (PPP) Hydropower Stations in Nepal

The need of infrastructure assets is increasing day by day. People around the globe are facing the infrastructure deficit each day. Generally government focuses on the new development of the infrastructure without keeping view of management of the infrastructure assets. Negligence to maintain asset to its designed performance level well in time will cost huge investment later on to recover (Hudson et al., 1997). In the past, decisions on investment and maintenance of infrastructure were made as per the political considerations, personal experiences, intuition and resource availability. Instead of considering strategic asset management, controlling backlogs as a short term solution was a common practice to measure success in asset management (Too et al., 2006). The conventional approach of asset management focused much on operation and functionality while failed to prove infrastructure asset as an economic resource where investment could be financially feasible, and socially and environmentally sustainable.

Hydropower, an electricity generation from kinetic energy of water, is a type of infrastructure. Electricity generation in Nepal is inadequate, unreliable and expensive (Asian Development Bank, 2009). For the past five year, public hydropower stations are able to generate only 73% of the designed average annual generation. In the year 2009, NEA has suffered a loss of 4.68 billion with cumulative loss of 12.33 billion (NEA Annual Report, 2009). Furthermore, Nepalese people are suffering from load shedding ranging from 2 hours to 16 hours a day for years. A part of these consequences can be attributed to asset management of hydropower stations. In this connection, it is worthwhile to investigate the asset management in hydropower stations of Nepal.

The contribution of asset management towards the overall performance of the asset is very high. However, the asset management is seldom practiced in a structured approach. Mr. Raj Kumar Lakhe made a study which main objective was to compare asset management practices in public and PPP hydropower stations in Nepal applying the investigation criteria developed in this study. To achieve this main objective, these sub-objectives were required:
1. To explore hydropower asset management factors and then develop criteria to investigate asset management practices in hydropower stations in Nepal.

2. To investigate the existing asset management practices in public and PPP hydropower stations of Nepal and conduct comparative study on distinct features which can affect the operation and maintenance sustainability.

3. To propose and recommend for improving the asset management in hydropower stations in Nepal

Conclusions

Investigation Criteria for Asset Management of Hydropower Stations

The investigation criteria for the asset management practices in hydropower stations along with the identified factors are validated by face-to face interview with the professionals in this sector. The verified criteria under seven factors are: 1) Local people as stakeholder, issues from them and attempts to address those issues from the management 2)Organizational development in terms of capacity development, motivation and training to the plant staff 3)Inventory management system in keeping records of operation and maintenance and balance of the spare parts and tools 4) Generation with respect to annul average designed generation and major outages & breakdowns as key performance indicators at the station level 5) Maintenance approaches adopted by the management 6) Provision of project documents as well as maintaining asset database and 7) Existing conditions of structures and equipment assessment process of the hydropower stations. The criteria are applied in each of two public and PPP power stations in this study. The investigation criteria can be used to other hydropower stations to know the internal strengths and weakness of the power station in managing their hydropower assets for operation and maintenance sustainability.

Public and PPP Practices in Hydropower Asset Management

Hydropower stations in Nepal both public and PPP are weak in managing hydropower assets. The cross case synthesis implied that within public and PPP power stations, there are significant differences in asset management practices. The size of the project basically governs the structure of asset management, the larger the power station, the better the asset management practices. However, lower cost of financing, operation and maintenance cost within the estimated amount and maintaining minimum balance of spare parts are observed in public practices. PPP power stations have shown better structured asset management in terms of project implementation, stakeholder relationship, organizational development, maintaining asset database, monitoring asset condition and carrying preventive maintenance for high reliability. The research findings on distinct features in asset management of public and PPP hydropower projects are summarized in the figure 1 below.



The procurement guidelines set by the donors with specified consultant, contractors and equipment supply are the main causes for the high initial investment cost of public projects. The decision making process is highly bureaucratic and centralized in public sector that is why all issues from local people are dealt at corporate level. Lack of determination and sense of belongings are the results of frequent transfer of staff. Lack of core technical personnel is apparent everywhere in public stations. Less attention to maintenance of existing plants and annual maintenance budget based on history without any initiation in schedule maintenance have made breakdown maintenance as the rule of work. The end result is, huge investment required to bring back the plant in operation, forced outages and hence low plant utilization, low productivity and higher generation cost. The researcher finds difficulties associated with operations of intake gate, trash rack, and other civil and hydro mechanical parts are caused due to lack of attention which do not require the especial expertise in the field.

Different financing structure is practiced but a joint venture with the vendors, contractors and power purchaser is in common practice in PPP projects. A proper mix-up of national and international design and construction team either through competitive bidding or direct negotiations have helped to lower the initial project cost in the context of PPP projects. A direct negotiation with the vendors establishing long term relationship in operation and maintenance are also in practice. A partially decentralized system is there for the operation and maintenance team and most of local peoples’ demands are assessed and addressed by the station management. PPP power stations are effective in retaining staff by implementing motivation schemes and developing sense of belongings of the individual to the company. The structures are intact and schedule maintenance is the maintenance approach carried out incorporating the hydrological cycle of the plant so as to optimize the generation. Higher plant utilization and higher productivity is the end result of the structured asset management practice in the PPP hydropower stations in Nepal.
Recommendations for the Improvements

Instead of taking into account long term structured asset management, tactical asset management is a common practice and measuring the success in terms of overcoming backlogs are the main pitfalls in the asset management of public hydropower power stations. While PPP better know the investment in strategic asset management of hydropower station is financially feasible and economically viable. Following recommendations for the improvements with intended objectives in asset management practices of hydropower stations in Nepal are summarized in the Table 1.

His thesis abstract is copied and posted

Abstract

The hydropower organizations in Nepal are constantly striving to ascertain the value addition to its stakeholders. Traditional delivery system alone has not been able to fulfill and sustain hydropower development. To overcome this limitation, public private partnership (PPP) has been introduced as an innovative public policy tool for the need of dynamism in traditional delivery approach. Despite the abundant hydropower potential in the country, the electricity generation is inadequate, unreliable and expensive. A part of these consequences can be attributed to hydropower asset management. In this connection, this study attempts to investigate the existing asset management practices in public and PPP hydropower stations in Nepal.

Based on the verified investigation criteria, each of two public and PPP hydropower stations are investigated through direct interview with station managers and site observations. The results are analyzed using explanation building as the specific analytic approach in the case study. The distinct features of asset management in public and PPP practices are identified, analyzed and highlighted.

The research findings reflect that both public and PPP practices are weak in managing hydropower assets in Nepal. The cross case synthesis implies that within public and PPP power stations, there are significant differences in asset management practices. However reduced cost of financing, though initial investment is higher by 35% than in PPP, maintaining minimum balance of spare parts and lower operation and maintenance cost are identified in the public practices. While, PPP practices have revealed better structured asset management in terms of project implementation, stakeholder relationship, organizational development, maintaining asset database, monitoring asset condition and carrying preventive maintenance for high reliability which has resulted maximum plant utilization and higher productivity.