NEA delays Upper Modi project

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    KATHMANDU, Aug 13

    upper_modi_K_waterThe Upper Modi Hydropower Project (47 MW), set to be constructed with joint investment of South Korean company and the Nepal Electricity Authority (NEA), is facing uncertainty after the delay by NEA board to give approval.

    NEA and the Korea Water Resource Corporation (K-Water) had reached an agreement on the form of investment structure last February and it was sent to the board for final approval. Construction of the project only starts after the board’s approval but it has yet to decide in eight months. An NEA official said that the project is not in priority despite the proposal reaching the boardroom repeatedly. “The project has been affected due to indecision. K-Water is ready to invest but the board is creating uncertainty by not taking decision,” the official stated. Executive Director of NEA Rameshwore Yadav, according to the official, has expressed commitment to take the proposal of Modi to the next board meeting. The NEA board meeting has not been held after the Commission for Investigation of Abuse of Authority (CIAA) initiated investigations on the NEA staffers involved in irregularities during procurement of transformers.

    K-Water is responsible for making financial arrangements for the project. It plans to bring investment from the Asian Development Bank (ADB) and Export Import (Exim) Bank of Korea. The two institutions had signed Project Development Agreement (PDA) in April, 2011 and agreed to move the project forward within a year by forming a joint company. The project has already been delayed by five months. K-Water had agreed to invest 80 percent in the project and NEA 20 percent at the time but it has since rearranged the investment structure saying it will invest 30 percent, NEA 60 percent, and the rest 10 percent will be collected from the general public after the project did not turn out to be financially attractive following feasibility study.  K-Water decided to reduce investment after the feasibility study, done jointly with NEA, showed that the generated electricity should be sold at a minimum rate of 8.50 cents or Rs 7.22 per unit to take loans at commercial interest rate.

    The project required soft loans after NEA stated that it cannot pay more than 6.50 cents or Rs 5.52 for every unit. Involvement of the Nepal government became necessary for the project due to ADB’s condition that K-Water cannot invest abroad taking soft loans despite being a government-owned company. K-Water will make financial arrangements despite involvement of the Nepal government. The feasibility study has put the estimated project cost at Rs 6.70 billion (US$ 780 million). The project being constructed for internal consumption is expected to generate 283 million units of electricity a year. Its environmental study report has also been approved.

    The run of the river project will be constructed in Parbat district. Its power house will be constructed in Syaule Bazar and the length of its tunnel will be six kilometers. The electricity generated from this project is planned to be connected to the proposed New Modi Sub-station at Dimuwa, Parbat.  The project is scheduled to be completed within four years of start of works. An 11-kilometer dirt road to the project site ahs already been completed.

    Source : Karobar Daily.