Nepal | September 22, 2020

Govt likely to scrap West Seti deal

Himalayan News Service
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Kathmandu, May 24 

Upset with the dillydallying and one after another condition put forth by the Chinese company, the government will most likely scrap the deal of West Seti with China Three Gorges Corporation (CTGC).

The memorandum of understanding (MoU) between Investment Board Nepal and CWE Corp – a subsidiary of CTGC – was signed to develop the 750-megawatt West Seti Hydropower Project in February 2012.

CTGC and Nepal Electricity Authority had agreed to form a joint venture company – West Seti Hydropower Project Development Ltd – in November last year, in which NEA would have 25 per cent equity investment, whereas CTGC would hold three-fourth of the stake. The company has to allocate 10 per cent shares to the public. The project was expected to be completed at a tentative cost of $1.81 billion in 79 months.

However, CTGC, which had signed a joint venture agreement – five years and eight months after the MoU was signed – to start the project within two years, started putting forth various conditions, like capitalising the investment during the time of study, demanding exclusive tariff rates for power produced in wet season, sovereign guarantee of the Nepal government to obtain loan from the ExIm Bank of China, among others.

Against this backdrop, the 29th board meeting of the Investment Board Nepal led by Prime Minister KP Sharma Oli, on March 10, had formed a study committee under the convenorship of then secretary of the Office of the Prime Minister and Council of Ministers, Mahendra Man Gurung, to look into the matter and submit a report within a month. The committee has already prepared the report and submitted it for discussion over the next board meeting of Investment Board Nepal.

According to Gurung, indications are not favourable towards CTGC. The study committee has recommended scrapping the MoU and selecting a developer through competitive bidding or holding negotiations with the Chinese company one more time to reduce the capacity of the hydropower project to 550 to 600 megawatts. The Chinese company had also discussed with the government officials that the project cannot be developed at 750 megawatts due to changes in hydrology in recent years.

The study has stressed on competitive bidding for transparency and expediting the project as the reliability of the Chinese company has already been tested in West Seti.

The next meeting of the IBN will decide the fate of the project, according to members of the study panel.

A version of this article appears in print on May 25, 2018 of The Himalayan Times.

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