Last week, as the promoters of Upper Trishuli-1 were preparing to meet in Montreal, Canada, to work out the detailed design of the 216-MW hydropower project, they got the shocker. Their application for licence to generate power had been cancelled through a secretary-level decision.
“We had 60 employees on the project site, drilling holes to get information for the detailed design, when we received the news,” said Yi Bo-Seuk of Korea South-East Power Co. “It is regretful that the project was cancelled without any prior information. We are shocked and surprised,” he said.
When they landed in Kathmandu, they learnt that their licence was the only one to be cancelled out of the numerous applications, that too despite sincere progress in implementing the project.
The government cited Rule 12 of the Electricity Rules while scrapping the licence.
“As the company didn’t come up with the progress report seeking extension of the licence, the ministry scrapped the survey licence as per the existing rules and regulations,” said a high-level official at the Ministry of Energy. “It will be better if the company goes to the court. The ministry’s decisions are based on rules,” he said.
Energy Secretary Hari Ram Koirala was not available for comment.
Nepal Water and Energy Development Company is contesting the validity of the claims cited by the MoE and plans to go to court if their concerns are not addressed.
According to the NWED, the feasibility study was completed and a report was submitted to the MoE through Department of Electricity Development.
A Letter of Intent to purchase electricity to be produced from the project was given by NEA on 20 December 2011. Similarly financial commitments were received from IFC, ADB, Proparco, DEG and Himalayan Bank Limited, NWED Executive Chairman Kim Kyung-Sik claimed. The company, earlier this year, had further asked for permission from the ministry to start developing the access road from January next year.
Energy Secretary Koirala took the decision to scrap the licence on June 29. Two days later, the IDS Energy and China Hydro submitted the application at DoED seeking the project’s licence. On July 3, the government sent a letter to NWED, saying their licence for generation of power had been cancelled.
A senior officer of the IFC of the World Bank Group said it could come to no further commitment from the group if the decision was not reviewed. “Nepal government is giving a very strong signal to the investors in the outside world that this could happen to you,” he said. “Why did the government pick this project out of so many?”
Government officials said it was just a beginning. “The licence of projects lingering for more than five years without any progress will be cancelled in coming days,” the official added.
KOSEP, which intends to finance 50 per cent of the project cost, is a fully government owned venture of the Korean government. Interestingly KOSEP has a $6 billion project in Saudi Arabia where most of the work is done by Nepali labourers.