Chinese developer approves JV pact

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    Aug 31, 2017-

    The long-delayed West Seti Hydropower Project is likely to be implemented soon, as the board of directors of the Chinese company, which is building the project, has endorsed an agreement signed previously with Nepal Electricity Authority (NEA). This has paved the way for establishment of a joint venture company to formally begin construction of the $1.6-billion reservoir project.

    The West Seti hydro project is being developed by China Three Gorges Corporation (CTGC). The company had entered into an agreement with NEA, the state-owned power utility, to jointly build the project in far western Nepal in January.

    At the time of signing the joint venture agreement, both sides had agreed to get the document approved by their respective board. Since then NEA’s board of directors has endorsed the agreement. But CTGC was delaying the process citing various reasons.

    “We just came to know that the CTGC board has also approved the joint venture agreement,” a source at the Investment Board Nepal (IBN), which is overseeing the project’s implementation, said.

    The source, however, informed that “the IBN is yet to get an official letter from CTGC on the matter”. “So, we don’t know whether the endorsement was conditional or with no strings attached,” added the source.

    The Chinese company had sent the draft of the joint venture agreement over two years ago. At that time, the IBN paid no heed to the document and instead developed a new one. This led to delay in signing of the joint venture agreement.

    But even after the deal was sealed the Chinese company took time to endorse it citing various reasons.

    In June, for instance, CTGC queried about NEA’s tariff structure for electricity generated by multipurpose projects. This indicated the Chinese developer’s intention to transform the project into one that would not only generate electricity but provide irrigation services as well.

    NEA holds separate negotiations before fixing tariff for electricity generated by multipurpose projects, although its latest power purchase agreement guideline has fixed different rates for power generated by different types of projects. In the past, the Chinese developer had also expressed concern about the NEA’s financial health, and queried about its ability to arrange funds to inject capital into the project.

    These interruptions have been delaying the construction of the much-awaited project, which will be 75 percent owned by the Chinese developer. NEA will own 25 percent stake in the project.

    The government and CWE Investment Corporation, a subsidiary of CTGC, had signed a memorandum of understanding in August 2012 for the development of the project located in the far-western region of the country.

    The project will spread over Baitadi, Bajhang, Dadeldhura and Doti districts.

    The project was initially expected to generate 750 MW of electricity. But now there is uncertainty over its power generation capability, as the Chinese developer has proposed downward revision of the installed capacity stating water level in the river basin has dropped in recent years.

    Source: The Kathmandu Post