Korean contractor ‘willing’ to mend fences

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    KATHMANDU, SEP 06 –

    Chameliya Powerhouse Site
    Chameliya Powerhouse Site

    A week after the contract termination came into effect, contractor Korea Hydro and Nuclear Power (KHNP) Consortium on Thursday expressed willingness to resolve its differences with the government.

    KHNP, a Korean joint-venture, was assigned to carry out electro mechanical and hydro mechanical work on the 30-MW Chameliya hydropower project.

    In a letter to the Nepal Electricity Authority ( NEA ) on Wednesday, the Korean contractor said that it was prepared to continue the work if conditions were met. The conditions include prompt payment of costs worth $16.2 million, performance guarantees, advance payments and a joint working schedule.

    In the first week of August, the KHNP notified the NEA that it was breaking the contract, stating that the project developer had failed to fulfill the firm’s demands.

    Following the Korean firm’s warning, the NEA formed a coordination committee under its board director Vivek Tater. On August 14, the company formally announced that it was breaching the contract, giving the NEA a 14-day notice.

    The Korean firm’s recent move to resolve the issue through mediation follows the Korean EXIM Bank’s intervention between the contractor and the NEA . In a letter to both the NEA and the KHNP three days ago, the Korean EXIM Bank had asked for the issue to be resolved ‘for the sake of the project and the two countries mutual relationship.’

    Korean EXIM Bank is the sole lender for the projects hydro mechanical and electro mechanical works. Of the $45 million committed from the bank, the project has received only $6 million.

    A board member of the NEA said that the bank has committed to providing additional amounts for the resolution of the problem and carrying out project works smoothly.

    Project Chief Rajendra Manandhar confirmed that the NEA and the project office received the KHNP’s letter on Thursday. “We have agreed to proceed with talks for the project’s implementation,” he said, adding that the NEA responded immediately to the letter stating its cooperation.

    Manandhar said the NEA had written a letter to Bank of Kathmandu (BoK) on Thursday to extend the contractor’s advance payments by 60 days. The company has security deposits worth Rs 32.6 million, with an advance worth Rs 122.8 million at the BoK.

    “We have asked the bank to extend the validity of the company’s advance payment for 60 more days,” said Manandhar.

    On Aug 30, the NEA asked the BoK to release advance payments deposited by KHNP Consortium. As per the contract between the NEA and the KHNP, the period of advance payment (and the contract) terminated automatically on Aug 31. The NEA claims the company’s performance security remains valid until Aug 31, 2014. The Korean company filed a petition to the Appellate Court (Court of Appeals), Patan, a month ago asking the court to allow it to take back its performance guarantee bond and advance payment.

    After the court rejected the Korean firm’s demands that it be allowed to terminate the contract with the NEA last Friday, the government power entity asked the BoK not to release the contractor’s performance guarantee bond and to release the advance payment to the NEA .

    The company was awarded Rs 3.8 billion (US$ 48 million) for the contract in April, 2009 for electro mechanical and hydro mechanical works, as well as the construction of transmission lines.

    Source : The Kathmandu Post