Kathmandu, March 6

Officials of China Three Gorges Corporation (CTGC) have put forth some conditions to take the West Seti hydropower project forward.

During a meeting with Nepal Electricity Authority (NEA), which will have 25 per cent stake in the 750-megawatt project, representatives of CTGC have expressed concerns related to bankability of the project going by the current tariff policy of NEA. It has also requested capitalisation of earlier investment in the project cost (during study phase) and that NEA and CTGC should share the cost at 25 and 75 per cent ratio thereafter.

Officials from CTGC also interacted with the Investment Board Nepal (IBN) officials on their stances. According to Maha Prasad Adhikari, CEO of IBN, the next board meeting of IBN, led by the prime minister, will discuss the development of West Seti project and further correspond with the Chinese company.

Located in the far western region of Nepal, West Seti project has significance in the overall socio-economic development of the region.

NEA has fixed rates of Rs 12.4 and Rs 7.10 per unit in dry season and wet season, respectively. As per the NEA requirement, the project must generate 35 per cent of total installed capacity in the dry season. During the wet season, NEA slashes tariff by a similar per cent if the project generates the seasonal energy of above 50 per cent. For example, if a project generates 65 per cent of the rated capacity, per unit tariff will be reduced by 15 per cent to Rs 6.035 for energy exceeding 50 per cent of the installed capacity.

As per the NEA’s power purchase agreement template for foreign investment projects, tariff rate could be revised if project’s return on equity exceeds 17 per cent.

NEA has recently signed foreign currency denominated PPA with a South Korean developer — Nepal Water and Energy Development Co Pvt Ltd — based on the standard PPA template, in which the authority offered foreign currency denominated PPA for first 10 years or till payback period of foreign loan, whichever comes first.

NEA has clearly said that there will be no differential treatment among foreign investors.

CTGC, however, has been seeking policy guarantee of exchange facility after 10 years and has asked NEA to ensure 17 per cent rate of return citing that the authority will also have to incur losses as it will have 25 per cent stake in the company.

The subsidiary of the CTGC, CWE Investment Corporation and NEA had signed a joint venture agreement on November 16 to set up a company — West Seti Hydropower Project Development Ltd — to develop the project.

The construction of the project was supposed to start by 2014 as per the memorandum of understanding signed between Investment Board Nepal and CWE Investment Corp in February of 2012.