Butwal Power in Nepal Continuing to Improve Environmental and Social Management System


Butwal Power Company ESMS Training © Louisa Zhang

Uttar Kumar Shrestha, the chief executive officer of the Butwal Power Company (BPC) in Nepal is driving change in his company’s environmental and social management system (ESMS).  As the company develops additional projects and expands its portfolio, Shrestha says the time is right to update its internal system.

“At BPC, we are committed to good governance, stakeholder engagement, and achieving good industry standards in our operations,” says Shrestha. “Environmental and social management systems are not a one-off.  Improving our company’s ESMS is continuous and will evolve over time.”

BPC is one of Nepal’s leading power-generation and distribution companies. It has a combined operating capacity of 21.4 megawatts at its two plants in Jhimruk (12 MW) and Andhikhola (9.4 MW). Additionally, BPC has a 60 percent stake in the 4-MW Khudi project, a 16.8 percent stake in Himal Power Limited, that operates 60 MW Khimti 1 Hydropower Project , and approximately 150MW under different phases of development. A publicly-listed company, BPC provides electricity to over 48,500 domestic and industrial consumers across four rural districts; Palpa, Syangja, Arghakhanchi, and Pyuthan. In Syangja and Palpa, a majority of users are low-income subsistence farmers benefiting from BPC’s tiered tariff structure that makes electricity more affordable through user organizations.

Power outages plague Nepal. Communities currently experience approximately 13 hours of load-shedding daily. In January 2016, the Nepal Electricity Authority reportedly increased power cuts from 77 to 86 hours a week. Small hydropower developers such as BPC are trying to more sustainably tap into Nepal’s water resources to provide longer periods of electricity to over 80 percent of the population that lives without it. Currently, Nepal generates only around 2 percent of its hydropower potential.

BPC received IFC financing in 2010. In 2011, BPC’s electricity-generation output increased by 5 percent over the previous year. Additionally, revenues from electricity distribution increased by 14 percent.

IFC’s hydro advisory recently provided BPC with advanced training on its ESMS. The training was conducted over three days and provided BPC with tools to strengthen its current environmental and social management system. The training covered nine key steps:

  • Developing a policy statement
  • Identifying risks and impacts
  • Developing management programs
  • Assessing organisational capacity and competency
  • Verifying emergency preparedness and response
  • Ensuring stakeholder engagement
  • Developing external communications and starting grievance mechanisms
  • Highlighting the importance of reporting back to affected communities
  • Ensuring monitoring and review processes.

 

“Management needs to be aware of environmental and social risks and their impacts on company performance,” said Jeremy Ansell, IFC’s senior environmental specialist, at the training. “The role of senior management in the implementation of a company’s environmental and social management system is crucial; it demonstrates the leadership is on-board and commitment is made.”

BPC’s management reviewed its environmental and social-risk policy and self-assessed its risk-management system. The team identified potential risks of a given project and assessed how these would impact workers, the environment, and affected communities. Additionally, the team discussed mitigation measures already in place and strategized on how to continue to mitigate against any new risks and potential impact to lenders.

By the end of the training, BPC’s management team identified challenges that it aims to overcome by strengthening their environmental and social management system, including labor management, land acquisition and compensation, and finding reliable suppliers.

In the future, IFC’s hydro advisory will conduct a deep-dive into IFC’s Performance Standards for BPC’s senior management executives as the company expands to other projects. 

Published in July 2016