It has been revealed that Electricite de France (EDF) did not invest in Upper Karnali Hydropower Project due to differences with GMR Energy Limited of India over share ownership as per the provision mentioned in the project development agreement (PDA).

    The negotiations between the two companies could not reach conclusion with EDF adamant that it will invest only on getting 51 percent stake. Sources at the Investment Board Nepal (IBN) said EDF could not come as the PDA mentions that GMR must have majority stake in the project. The Nepal Electricity Authority (NEA) will have 27 percent stake, International Finance Corporation (IFC) under the World Bank 10 and GMR 63 as per the investment structure for the project. The NEA has got the 27 equity for free. GMR and the NEA have already formed GMR Upper Karnali Hydropower Limited to develop the project.

    “There was no way EDF could have been given 51 percent stake as the investment structure had already been formed,” an IBN source said. GMR can sell ownership to relinquish majority stake only two years after the project starts generation, according to the PDA. GMR had been holding discussions with different European institutions including EDF to rope them in as partner after facing financial problem since 2008.

    The IFC is currently leading the initiative to arrange necessary investment after making equity investment in the project. The Asian Development Bank (ADB) and European Investment Bank (EIB) are preparing to invest in the project as a result. They have submitted letters of interest to GMR to invest over Rs 100 billion.

    EIB representatives return back

    Representatives of ADB, IFC and EIB, who had come to study about feasibility and other issues before investing, have returned back after holding discussions with the IBN and other stakeholders. They had met Prime Minister (PM) KP Sharma Oli on Tuesday to discuss about investment.

    The bank representatives had come to Nepal to study about the state of project, feasibility, return on investment, and security. They will prepare evaluation report after considering the state of project and overall condition of the country, and will accordingly decide about whether to invest in the project or not. The project seems financially attractive as per the feasibility study. The project is cheap like Upper Tamakoshi but its cost has been inflated citing risk of US dollar.

    The IFC has estimated the project cost to rise to around Rs 140 billion even as the detailed project report (DPR) prepared by GMR Upper Karnali Hydropower Limited had put the cost at Rs 116 billion. Investment structure has been prepared in a way that there is 30 percent equity investment and 70 percent loan investment.

    Memorandum of Understanding has already been signed with the Power Trading Corporation (PTC) of India to sell the electricity generated by the project but formal power purchase agreement (PPA) has yet to be signed.

    Source : Karobar Daily