CWE seeks market guarantee for West Seti

KATHMANDU, Sept 2

west_setiThe CWE Investment Corporation of the China Three Gorges Corporation has asked the government to provide guarantee of market for electricity to be generated by the reservoir based 750-MW West Seti Hydropower Project.

The CWE stressed on market during the bilateral talk on Tuesday after the Nepal Electricity Authority (NEA), the Energy Ministry and the National Planning Commission (NPC) presented different data on demand and supply of electricity. The CWE has been concerned further after the institutional plan prepared by the NEA mentioned that electricity generated by West Seti will be required only after 2027. The CWE plans to complete the project by the end of 2021. It expressed commitment to construct the project at the time when Nepal will need electricity from West Seti. It has also agreed for scientific study for projection of electricity demand during the meeting. Agreement has also been reached for projection of the state of demand and supply after six years. Chief Executive Officer (CEO) of the Investment Board (IB) and CWE President Lu Guojun took part in the meeting. Additional discussion on the issue of transmission line, land acquisition, resettlement and the rate for purchase of electricity has yet to be done.

The working schedule set in the Memorandum of Understanding (MOU) signed two years ago has already been affected, and formation of a joint company for construction has also been consequently delayed. The MOU states that Nepal will do the works for infrastructure development, resettlement and land acquisition. The CWE has already submitted financial and technical reports to the IB and both the reports have showed the project to be financially attractive. The IB has already expressed commitment on resolving the issues of resettlement of the displaced, land acquisition, rate for power purchase agreement (PPA) for a reservoir based project, return and construction of transmission line.

The feasibility study of the project has showed that 3.33 billion units of electricity can be generated annually. The estimated cost of the project is over US$ 2 billion while the preliminary study had put the cost of constructing transmission line at over US$ 400 million. The cost of resettlement and land acquisition has not been determined. Nepal has asked for soft loan from China for construction of transmission line.

The estimated financial analysis of CWE states that the rate of PPA should be 5.40 cents during the rainy season and 9.50 cents during the dry season for the project to be financially lucrative. The CWE has concluded that the annual inflation should be three percent until 10 years, and loan period 18 years out of which six years have to be grace period for the project to be financially viable. The MOU mentions that Nepal will have to invest in construction of transmission line for the project and China will help in making financial arrangements for that. The project will be built in Public Private Partnership (PPP) model. The locals will be provided up to 10 percent shares in the project that will have 65 percent shares of CWE and 25 percent of Nepal government, according to the MOU. The project will be constructed in Doti, Dadeldhura and Bajhang districts of the far west region.

Written commitment sought for grant

The IB, meanwhile, is set to ask for written commitment from the Finance Ministry on the issue of grant of Rs 5 million per MW to be provided for Upper Karnali Project. It has asked for the written commitment as the facilities to be provided for the project will have to be documented in the Project Development Agreement (PDA) for the project. The IB is scheduled to acquire the written commitment on Wednesday after discussions with the officials at the ministry as Tuesday was a public holiday.

Discussions will also be held with the officials at the Ministry of Irrigation about the effect the tailwater of the project can have downstream. The IB and promoter of the project GMR Energy Limited of India are close to agreement on all the issues related to PDA.

Source : Karobar Daily