IB stirs into action to sign PDAs for Upper Karnali and Arun 3 HEP

KATHMANDU, OCT 02 –

The Investment Board ( IB ) has stirred into action to sign power development agreements (PDA) with two Indian companies, GMR Energy and Satluj Jalvidyut Nigam, to develop the Upper Karnali and Arun 3 projects respectively.

The two projects have lain in limbo for the last three years due to the government’s indecisiveness and lack of an appropriate PDA model in the country.

An IB meeting chaired by Prime Minister Baburam Bhattarai on Friday decided to begin negotiations with the two companies on the double in order to sign the PDA. “As the companies have been waiting for a long time to develop these mega hydro projects in Nepal, negotiations for the PDA will be begun soon,” said a high level IB source.

Deependra Bahadur Kshetri, vice-chairman of the National Planning Commission (NPC), said the meeting had decided to negotiate with the Indian investors and finalize the date for the PDA. He added that the IB would process the environmental impact assessment (EIA) submitted by GMR Energy. The company had presented its EIA report to the board a month ago.

The IB had prepared the PDA template and sent it to GMR and Satluj at the end of June. “As the PDA format has tried to get the maximum benefit for Nepal, the Indian investors have complained that it is not so bankable,” said the official. These issues will be sorted out during the negotiations, he added.

The IB has studied the documents submitted by these two Indian companies including their financial model. Since these documents are at a matured stage, the IB can rush through discussions and sign the PDA without much delay.

Investors seek a government assurance through the PDA that helps avert any possible social, economic or policy-level uncertainties during construction. Generally, issues related to taxes, licence period, free energy, royalty, repatriation rights and parties’ obligations are included in the PDA. Delays in preparing the text of the agreement have been preventing the government from concluding deals with power developers so far. The delay has prevented developers from going into the construction phase.

On May 25, Prime Minister Bhattarai had asked the board to develop five mega hydro projects including the 650 MW West Seti, 900 MW  Upper Karnali, 600 MW Upper Marsyangdi, 900 MW Arun III and 880 MW Tama Koshi III in line with the IB Act that states that any hydro power project with a capacity of more than 500 MW will come under the purview of the board.

On April 21, Prime Minister Bhattarai had directed the Ministry of Energy (MoE) to ask the IB to draft the PDA as it was taking too long. The PDA the MoE has been working on is for export-oriented projects, and the IB has focused on a PDA for projects which will be developed for local consumption including the West Seti Hydropower Project.

The PDA signing process with seven hydro projects was initially postponed in September 2010 after the UCPN (Maoist) asked the government to shelve projects being developed by Indian companies.

A power tussle between the then energy minister Prakash Sharan Mahat and energy secretary Shankar Koirala further delayed the process. “Once the PDA for Upper Karnali and Arun 3 is signed, preparations will be begun to sign similar agreement with other projects,” said the official.

Source : The Kathmandu Post