1. 1 Experiences in Hydropower Development in Nepal An International Perspective Einar Stenstadvold Executive Vice President Asia, SN Power

2. 2 SN Power is placed in the intersection of two global megatrends Growth in emerging markets Demand for renewable energy

3. 3 Mission ”To become a leading hydropower company in emerging markets, contributing to economic growth and sustainable development”

4. 44 Business objectives and strategy  Established in June 2002 - Jointly owned by Statkraft (50%) and Norfund (50%)  Business objective: To invest in clean, renewable energy projects on commercial basis in selected emerging markets  Long-term investment strategy  Capitalizes on its owners’ technical and financial strength and international hydropower experience  Transfer of Norwegian hydropower expertise

5. 55 SN Power presence Established in Asia and Latin America India Nepal Sri Lanka Bhutan Peru Chile Brazil Philippines Vietnam Laos Mozambique Zambia

6. 66 Portfolio & ambition Operating plants 636 2575 Construction 272 1086 Total 908 3666 Pipeline 1800 8000 Net Portfolio 2008 (equity) MW GWh 5X Ambition 2015 4000 MW 15 - 20 TWh

7. 77 Himal Power Limited (HPL) Experience  The overall experience has been good  Profitable project  Good and stable hydrology  High plant availability  There have been challenges  Silt and operational conditions  Legal and political instability  Security situation  Local community development crucial to success

8. 88 Project Development Situation Opportunities  Many physically good projects in Nepal  Strong long-term market possibilities  International companies interested to invest in Nepal  Requires strong international hydropower and peaking power experience to develop the potential in the long run Challenges  Long term political stability  Financing: FDI/ Country rating risk  Ineffective “one window policy”  Two-step (survey and generation) licensing procedures  Time consuming Environmental Impact Assessment process  Future challenge: Division of resources in Federal Nepal

9. 99 Project Development & Licensing Situation Project Development  Sanctity of Contracts – not honored  Weak Implementation of Policies, Acts and Regulations  Inconsistency among various line ministries Licensing  Licenses not awarded in stipulated time  Real developers not incentivized  Trading in licenses is in vogue  Royalty and Tax level not competitive in the region

10. 10 Human and Institutional Resources Situation Positive:  Hydropower: a national priority  Low cost level  Good quality hydropower institutions Challenges:  Investment-unfriendly labor laws  Frequent labor disputes  Shortage of qualified hydropower, legal and finance professionals at all levels  Limited manufacturing and construction capacity

11. 11 Conclusions  Our portfolio in Khimti River Basin can be increased to about 150 MW  Development of 640 MW Tamakoshi 2&3 has begun, with construction to start in 2010-2011  We are looking at other possibilities in Nepal  We believe in integrated river basin development for: Operational efficiency Optimum utilization of water resources Optimum utilization of Logistic and resources

12. 12 Conclusions  Nepal is an emerging economy coming out of a very difficult and unstable political situation  SN Power (through HPL) has lived with Nepal through the insurgency and wants to live with Nepal into a brighter future  SN Power believes in Nepal and is already taking part in the 10,000 MW Vision  Many challenges ahead in meeting this Vision  SN Power ready to work with the Government of Nepal to overcome these challenges and to contribute to the Vision