The Nepal Electricity Authority (NEA) will have the right to veto any resolution passed by China Three Gorges Corporation (CTGC) through the joint venture company to be formed to build the West Seti Hydropower Project even though the Chinese company will have a majority stake in it.
CTGC will hold 75 percent of the shares in the proposed joint venture company and the Nepal government will hold the rest as per the memorandum of understanding signed between the Chinese company and Investment Board Nepal (IBN) in August 2012.
The government has decided to allow the NEA to hold a 25 percent stake in the joint venture company. Since the Chinese company owns the majority of the shares, it will have the full right to run the joint venture company unilaterally by passing special resolutions.
“We had initially proposed that the NEA’s share should be increased slightly from the 25 percent stake it had been allotted so that it would also have some say in the operation of the joint venture company,” Sher Singh Bhat, deputy managing director of the NEA, told the parliamentary Agriculture and Water Resources Committee on Sunday.
“As the issue of shares had already been settled, we agreed on the NEA’s holding the right to veto any special resolution passed by CTGC.”
The NEA was concerned about its marginalization despite having a significant stake in the proposed company. Shares will also be sold to the general public from the NEA’s allotment.
According to Bhat, the NEA had submitted a list of conditions under which CTGC would be allowed to pass special resolutions. “The two sides subsequently agreed that the NEA would have the right to veto these resolutions,” he said. CTGC subsidiary CWE Investment Company had sent a draft joint venture agreement to the NEA for its perusal about nine months ago, but it had made no move to sign the pact until last month.
The state-owned power utility had cited lack of resources and a need to study the country’s projected power demand when the hydro plant is scheduled to come online. As the NEA is the sole power buyer, it is worried about possible losses due to surplus electricity.
Recently, the NEA has shown greater interest in the project. Just before Prime Minister KP Sharma Oli’s trip to China last March, the NEA and CTGC had discussed whether an accord to build the 750 MW West Seti project could be signed during the visit.
A CTGC delegation led Yao Sexiong, general manager of its investment department, and Sylvia Li, business manager, had visited Nepal and discussed the possibility with NEA officials.
During the meeting, the Chinese side had pledged to help find lenders to finance the NEA’s equity portion. The cash-strapped NEA has been suffering losses for a long time.
In April 2014, the Finance Ministry had written to the Chinese government asking for $400 million in soft loans to allow the NEA to be an equity partner in the joint venture company and build a transmission line to evacuate the power generated by the plant.
According to Bhat, different regulations related to foreign direct investment in Nepal and China have also delayed the signing of the joint venture deal.
The two sides are expected to hold another round of meetings soon. “We have invited them for further talks through IBN,” said Bhat. The West Seti project is estimated to cost $1.6 billion.
Source : The Kathmandu Post