Financial closure plan to be ready by 2020

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September 27, 2019

Kathmandu: GMR, developer of the 900-megawatt Upper Karnali Hydropower Project, is trying to complete the ground works for financial closure of the project by 2020.

KK Sharma, project construction head of Upper Karnali, said the company plans to complete the process of engineering, procurement and construction (EPC) and award the contract to the selected firms by March 2020 if everything goes smoothly.

“We aim to start commercial discussion in November or December this year and after that we will carry out price negotiations and award the contracts of the project by March 2020.”

The company has initially selected three companies for civil, hydromechanical and other infrastructure works and seven companies for electromechanical works through open bidding.

Sharma further said that while the company has held high-level discussions and negotiations with the government of Nepal, Investment Board Nepal, and government of Bangladesh and various Indian state governments including Uttar Pradesh, Bihar, Haryana and Punjab and other concerned stakeholders, much remains to be done before the project can be fully executed.

Bangladesh has agreed to purchase electricity generated from the Upper Karnali Hydropower Project. In this regard, the Bangladeshi government has already inked an agreement with GMR and also with Nepal government to purchase 500 megawatts of power from the project.

Sharma also informed that the company has signed a memorandum of understanding with NTPC Vidyut Vyapar Nigam Ltd of India for sale of surplus electricity generated by the project. Similarly, the company is trying to sign an off-take agreement with Bangladesh Power Development Board.

“As we are a private company, it will take a bit longer for us to secure financing from international lenders,” Sharma said, adding that GMR is fully geared towards achieving financial closure, signing power purchase agreements and initiating the construction of the project as soon as possible.”

The project cost is estimated to hover around $1.1 billion.

As per him, the company is currently holding discussions with various multilateral development banks, which is conducting technical due diligence of the project. “We have, nevertheless, already secured commitment for financing from a consortium of international lenders,” he said.

Still, discussions are underway with Chinese and European commercial banks that have extended term sheets under the EPC financing model, along with the EPC bids received from Chinese bidders. Similarly, Nepali banks and financial institutions have also expressed strong interest to be part of this huge debt consortium.

Nepal will get 108 megawatts (12 per cent) power and 27 per cent equity from the Upper Karnali project free of cost. The reservoir project has been modelled to run in full capacity for only three months of the year. It is being c o n s t r u c t e d u n d e r t h e build-own-operate-transfer (BOOT) model. As per the project development agreement, the project will be handed over to the government after 30 years.

Moreover, dispelling rumours that GMR is going bankrupt, Sharma clarified that the company has sufficient funds and strength to invest in the project.

 

Source: The Himalayan Times