PDA talks with foreign developers to begin in Jan

Power development agreements

KATHMANDU, DEC 08 –

After several months of delay, negotiations on Power Development Agreement (PDA) with three foreign developers—GMR Energy, Satluj Jal Vidyut Nigam, and SN Power—is finally taking place in the second week of January.

The negotiations were halted after the three companies expressed reluctance to sign the pact, terming the PDA template ‘not bankable.’ The template was readied in mid- June.

A high-level source close to the Investment Board (IB) confirmed that preparations were underway to hold talks with power developers.

India-based GMR is developing Upper Marsyangdi (600 MW) and Upper Karnali (900 MW) projects. Another Indian company, Satluj, is developing Arun III (600 MW), while Norwegian SN Power is developing Tamakoshi III (880 MW).

All these hydel projects have been in limbo for the last three years due to the government’s indecision and the lack of an appropriate PDA model.

Though IB had planned to start negotiations with these companies in the first week of November and sign the PDA by December-end, the developers sought more time.

They had also forwarded commentaries over the provisions mentioned in the PDA template, which ‘tried to ensure maximum national interest’.

The need for making changes in the draft as per the developers’ requests was the major reason for delayed negotiations.

The template approved by Prime Minister Baburam Bhattarai was expected to provide the much-needed impetus to begin negotiations with the foreign hydropower companies. However, the template could not impress the Indian investors.

Investors seek government assurance through the PDA that helps avert any possible social, economic or policy-level uncertainties during the construction phase.

Generally, issues related to taxes, licence period, free energy, royalty, repatriation rights and parties’ obligations are included in the PDA.

Following complaints from the investors, IB has made some amendments in the PDA draft to make it more profitable and bankable for investors. “We have already incorporated the comments suggested by the developers,” said the source. “The template requires approval from the IB board.”

According to IB, once the amended version of the PDA is approved, the developers will be invited for negotiations. IB officials said the PDA template has been prepared including stern policies when it comes to benefit sharing, hydrological risk, governmental facilities for developers and other significant issues.

The source, however, said even if the negotiations start, it is not sure when the PDA will be signed.

“As the projects are worth billions of rupees and the PDA negotiations will take place amid the ongoing political turmoil, it cannot be said for sure how long the whole process will take to complete,” said a high-level official at Prime Minister’s Office.

Source : The Kathmandu Post