Kathmandu, August 14

Investment Board Nepal (IBN) has invited the China Three Gorges International Corporation (CTGC) — the Chinese company which formed a joint venture with Nepal Electricity Authority (NEA) to develop the West Seti Hydel project — for negotiations regarding the capacity of the project.

The board meeting of IBN, led by Prime Minister KP Sharma Oli, on July 17 had instructed IBN to hold a last round of negotiations with the Chinese party to break the impasse.

The CTGC was reluctant to develop the project at 750 megawatt capacity stating that it would not be able to meet the requirement of 35 per cent dry energy while developing the project at the aforesaid capacity.

After this, the board meeting of the IBN, before Prime Minister Oli’s visit to China, had formed a committee led by then Prime Minister’s Office secretary Mahendra Man Gurung and comprising Joint Secretary of the Ministry of Energy, Water Resources and Irrigation Dinesh Kumar Ghimire and NEA Managing Director Kul Man Ghising seeking recommendation for appropriate alternatives to take forward the project.

Based on the recommendation of the study panel, the IBN agreed to bring down the capacity of the project during negotiations with CTGC.

Maha Prasad Adhikary, CEO of IBN, has said that the dry season energy requirement of 35 per cent of the annual firm power commissioned from the project can be realised, while bringing down the project’s capacity to 620 megawatts.

The panel report has recommended IBN to not reduce the capacity of the project below 550 megawatts while negotiating with CTGC.

“We will decide the capacity of the project in between 550 megawatts to 620 megawatts,” said Adhikary. “We will try to optimise the capacity at the recommended threshold during negotiations.”

The date of the meeting has not been finalised yet, but IBN has corresponded with CTGC to sit for negotiations by the end of August citing that the board meeting of July 17 has asked them to break the stalemate within two months from the board decision.

CTGC and NEA have so far formed a joint venture company (JVC), in which the Chinese party has 75 per cent stake and NEA owns the remaining stake of West Seti Hydropower Project Development Ltd.

The Chinese company has not only been asking for the capacity of the project to be brought down but has also been seeking preferential treatment in power purchase agreement (PPA). It has been asking for foreign currency denominated PPA for 12 years or up to the payback period

of the foreign loan, whichever

comes first.

As per the PPA policy of NEA, it provides foreign currency denominated PPA in foreign investment projects till the payback period of loan or for initial 10 years, whichever comes first. However, CTGC has been seeking preferential treatment stating that the power off-taker has to treat peaking and storage projects differently in its PPA policy. NEA has fixed rates of Rs 12.4 and Rs 7.10 per unit in dry season and wet season, respectively, for storage projects.