IBN submits draft of Upper Karnali PDA

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    Power development agreementsKATHMANDU: The Investment Board Nepal (IBN) has forwarded the final draft of the Project Development Agreement (PDA) on 900-megawatt Upper Karnali hydroelectric project to India-based GMR Energy Ltd, indicating the two sides are inching closer to signing a deal.

    The final draft of the PDA was sent to GMR headquarters on Monday, a source with the knowledge of the matter told The Himalayan Times.

    “It is not known how long the company will take to respond,” the source informed.

    The IBN has lately been holding negotiations on Upper Karnali PDA with a team led by Ashis Basu, president of Corporate Functions at GMR Energy. 

    Although these negotiations started in April 2013, they have not concluded till date due to delay in settlement of issues related to tax concession and sharing of transmission lines, among others. Of late, the issue of political force majeure had emerged as bone of contention. 

    “The Nepali side has incorporated provisions to extend compensation to the project developer in case of political force majeure, (like decision to nationalise the project or breach of contract by the government),” the source said. 

    If the conditions incorporated by the IBN in the PDA are acceptable to the Indian side, a deal might be signed soon.

    After signing of the PDA, the project developer might take seven to eight years to generate electricity.

    GMR was awarded the Upper Karnali hydroelectric project, located in Surkhet, Achham and Dailekh districts, in 2008 through competitive bidding. 

    The project, being developed by a consortium comprising GMR Energy, GMR Infrastructure and Italian-Thai Development Project, is being built on build-own-operate-transfer (BOOT) model and will be handed over to the government free of cost after 25 years of electricity generation.

    The project, which will export electricity to India, will give 27 per cent equity and 12 per cent electricity for free to Nepal. In addition, the project will give average of Rs 5.51 billion in royalties, Rs 3.10 billion in income taxes, Rs two million in other taxes per year.

    In the 25-year concession period, the government is expected to generate Rs 467.24 billion from this project alone, of which Rs 132.17 billion will come through royalties, Rs 136.72 billion in the form of free electricity, Rs 74.51 billion through income taxes, Rs 50 million through other taxes and Rs 123.78 billion in the form of equity, according to the IBN.

    “Of the royalty extended, 50 per cent will go to the treasury, 38 per cent to regions affected by the project and 12 per cent to Surkhet, Achham and Dailekh districts,” the IBN has said. 

    Source : The Himalayan Times