Nepal | May 29, 2020

West Seti hydro project hits roadblock

Himalayan News Service
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Construction site of the 50 MW Upper Marshyangdi Hydorpower power Project in Lamjung. Photo: Ramji Rana

Construction site of the 50 MW Upper Marshyangdi Hydro power Project in Lamjung. Photo: Ramji Rana

Kathmandu, February 19

The government’s plan to build the 750MW West Seti Hydroelectric Project has hit a roadblock, as delay in signing the joint development agreement has prevented formation of a special purpose vehicle (SPV) to develop the project.

Nepal Electricity Authority and CWE Investment Corporation, a subsidiary of China’s Three Gorges Corporation, which is developing the West Seti project at a cost of around Rs 160 billion, must sign the JDA to form the SPV.

But before signing the JDA, NEA must agree to acquire 25 per cent stake in the project.

The Cabinet has already given the green signal to NEA to purchase the shares. But NEA’s board has not been able to endorse this decision.

NEA Managing Director Mukesh Raj Kafle had earlier told The Himalayan Times that NEA has not been able to take a decision ‘as it is not an easy one’.

“This is because the Chinese developer is not extending shares for free as in a few other projects being developed by foreign companies,” he said. This means, ‘we will have to fork out billions of rupees to purchase the shares for which many things have to be clear’.

To facilitate this task, the Chinese developer had forwarded the draft of the JDA to state-owned NEA in March 2014.

“NEA has not been able to muster confidence to sign the deal because many things in the draft agreement are not clear.

We have been telling this to officials of the Investment Board Nepal  which oversees hydro projects of 500MW or more  but they have not been able to put the pieces together,” said Suman Prasad Sharma, secretary at the Ministry of Energy, NEA’s parent body.

Sharma, who is also chairman of NEA, added, “Investment Board Nepal, which is working as a transaction agent in this deal, should play an effective role.

But so far, it has only been passing comments rather than holding face-to-face dialogue with us or providing documents,” adding, “We are very serious about building the West Seti project.”

The IBN, on the other hand, begs to differ.

“We have held many rounds of discussion at the offices of the MoE and the IBN. Meetings were also held after the Parliamentary Committee on Agriculture and Water Resources directed both the parties to come up with a common view on development of the project,” Ghanashyam Ojha, head of external affairs at IBN, said. “We don’t know what is causing the delay.”

Ojha also expressed surprise at NEA’s failure to endorse the draft of the JDA, despite Cabinet instruction to do so.

“Without JDA, SPV cannot be formed. And without SPV, the project cannot be implemented,” said Ojha.

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 hectare 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 by the end of 2017, IBN said.

The project has the capacity to generate electricity for 24hours throughout the year, except in the dry season when the power generating capacity is expected to dip to eight to nine hours a day.

A version of this article appears in print on February 20, 2016 of The Himalayan Times.

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