West Seti SPV formation delayed
Kathmandu, January 8
The West Seti Hydroelectric Project has not been able to set up a special purpose vehicle (SPV) to execute various tasks due to delay made by Nepal Electricity Authority (NEA) in signing joint development agreement (JDA) with Chinese developer of 750-megawatt project, Investment Board Nepal (IBN) said today.
CWE Investment Corporation, a subsidiary of China’s Three Gorges Corporation, which is developing West Seti project at a cost of around Rs 160 billion, had forwarded the draft of JDA to state-owned NEA in March 2014.
However, the board of directors of NEA has not yet extended a green signal to the management to sign the pact.
“If we enter into the agreement, we’ll have to acquire 25 per cent stake in the project. And since the Chinese developer is not extending the shares for free as in a few other projects being developed by foreign companies, we’ll have to fork out billions of rupees for this,” NEA Managing Director Mukesh Raj Kafle said.
The Cabinet has already directed loss-making NEA to acquire 25 per cent stake in the project.
“But we are not clear on whether it’s us or the government who’ll have to mobilise funds to purchase the shares. Also, the worth of shares is not clear,” said Kafle, adding, “We’ll sign the agreement once these issues are clear.”
Lack of clarity on these issues, however, is delaying establishment of the SPV, which will roll out the project.
“This is creating problems for the Chinese developer here, especially while conducting technical and hydrological studies in the project site,” Radhesh Pant, CEO of the IBN, told a press meet today. IBN oversees implementation of hydropower projects of over 500 MW.
Recently, the Chinese developer was barred from taking drilling equipment to the project site because a joint venture company, or SPV, to build the project has not yet been registered with the government, according to IBN staff.
“Despite these odds, around 36 Chinese engineers are working here, which shows keen interest of the developer to build the project,” Pant said.
West Seti project, which was handed over by the government to CWEI in February 2012, is located in the far-western region of the country.
The project developer needs to acquire 2,500 hectares of land in Doti, Dadeldhura and Baitadi districts to build the project, of which 30 per cent is private. Around 3,000 households also need to be relocated while developing the project.
“If all these issues are settled as soon as possible, the construction of the project can begin in the end of 2017,” said Pant.
The project has the capacity to generate electricity for 24 straight hours throughout the year, except in dry season when power generating capacity is expected to dip to eight to nine hours a day.