900 MW project to be completed within seven years
KATHMANDU, Sept 20 : Investment Board Nepal (IBN) and Indian company GMR have inked the Project Development Agreement (PDA) for construction of the US $1.5 billion Upper Karnali Hydropower Project.
If implemented as planned, the government will receive under the project 108 MW free electricity for its national grid by 2021 and an equity of 27 percent of the total project.
The project, which was awarded to GMR after open bidding in 2008, is the largest foreign direct investment in the country so far.
CEO of IBN Radesh Panta and R.V. Sheshan, representative of GMR, jointly signed the PDA document on Friday amid a function at Singha Durbar. The Cabinet had given its nod to IBN Thursday evening to sign the PDA.
Speaking at the function, Deputy Prime Minister and Home Minister Bamdev Gautam said the decision of bring in the biggest ever foreign direct investment project was taken in order to utilize natural resources for the prosperity of the Nepali people. “This will be instrumental not only in hydropower development but also in the socio-economic development of the country,” Gautam said, adding that the project implementation starts immediately.
Visiting Indian Home Minister Rajnath Singh was also present during the signing ceremony. Singh said that India wants to see the prosperity of neighboring countries. “GMR should implement the project in time,” he said adding that if GMR does not implement the project in time it will lead to loss of credibility. Prime Minister Sushil Koirala and Chairman of CPN-UML K P Sharma Oli were likewise present at the PDA signing.
Talking to Republica, Vice-chairman of NPC Govind Raj Pokhrel, who had led a technical team to study the PDA, hoped the PDA signing would be a first step towards the prosperity of Nepal and its people through the fostering of an improved investment climate in the country.
Speaking at a press meet following the PDA signing, GMR representative Sheshan said they will invest 25 percent as equity and seek the remaining 75 percent of the total project cost from financiers at home and abroad, all within two years. “We will implement the project within the next five years,” he added.
He also said they will look to the financial resources within Nepal besides investors worldwide. However, he informed that they had not yet lined up any other equity investor to date.
International Finance Corporation, a member of the World Bank Group, and the Asian Development Bank have already expressed interest in investing in the project.
CEO Panta said that GMR will bear all the costs of construction of a re-regulating dam for harmonizing the water flow for meeting irrigation requirements downstream.
Construction of the re-regulating dam, as suggested by an independent study team, was inserted in the PDA document after experts and the Ministry of Irrigation drew attention to the matter, saying the hydropower project would affect irrigation projects. Pant also said Nepal can buy energy at competitive market rates from the export-oriented project.
Under a force majeure clause, the Government of Nepal has to pay the developer an amount equal to its income of each day after 21 continous days of politically instigated protests that affect the project. “But it´s not binding to share the risks of any natural calamities,” added Pant.
“There will be three separate entities to monitor the project development, among them a high-level committee led by the vice-chairman of the National Planning Commission and including the secretaries of the ministries concerned, which was formed by the Cabinet on Thursday,” added Pant.
Source : Republica