Fate of Tanahu Hydropower Project uncertain

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    Dec 20, 2018

    The fate of Tanahu Hydropower Project has become uncertain after Cooperativa Muratori e Cementisti di Ravenna, the Italian contractor appointed to implement the scheme, got into a liquidity crisis.

    The plant is being developed by Tanahu Hydropower Limited (THL), a wholly owned subsidiary of the Nepal Electricity Authority.
    In October, THL signed a contract with the Italian company to execute the first package of the 140 MW storage hydropower plant which includes the formulation of a detailed design and the construction of the headworks.

    However, before releasing the advance payment to mobilise the contractor at the project site, CMC Ravenna landed in a liquidity problem, putting project officials in a dilemma over their next step.
    The Italian contractor which has bagged the contract worth Rs20.64 billion to execute its portion of the work is asking the project office to release the advance payment, THL officials are reluctant to do so. “If we release the payment, the contractor might flee the country without executing the work,” said a THL official requesting anonymity. “Also, we are not in a position to terminate the contract legally unless the contractor is declared bankrupt.”

    According to the source, THL is holding consultations with the Nepal Electricity Authority and the Energy Ministry before taking any decision in this matter.

    “We have been informed that the Italian Court has given 60 days to CMC Ravenna to settle its debts. In case it fails to settle its debts, the contractor will be declared insolvent, paving the way for us to terminate the contract,” said the source. “However, if CMC Ravenna isn’t declared bankrupt, we will release the advance payment only after signing a separate contract under which the money can be spent only at our project.”

    The Post’s repeated attempts to contact Salvatore Casciare, the CMC Ravenna representative in Nepal, were not immediately successful.

    The Tanahu Hydropower Project will be one of the biggest reservoir-type projects in the country with an estimated annual energy generation capacity of 587.7 gigawatt hours in the first 10 years of operation. The project can generate energy for six hours daily during the dry season.

    THL is developing the project using a credit facility extended jointly by the Asian Development Bank, Japan International Cooperation Agency and European Investment Bank. The project is estimated to cost $550 million.
    – BIBEK SUBEDI

    Source: The Kathmandu Post