PowerChina sees strong potential in Nepal’s hydroelectric sector with favorable policies

sheng-yuming

Sheng Yuming


Editor’s Note:

After President Xi Jinping’s meeting with Nepal Prime Minister Pushpa Kamal Dahal during the 8th BRICS Summit in Goa, India starting on Saturday, Sheng Yuming (Sheng), chairman of State-owned PowerChina Resources, spoke to Global Times reporter Li Xuanmin (GT) in Beijing on Sunday. They discussed the opportunities and challenges related to the company’s investment in Nepal and the nation’s overall business environment.

GT: What is the status of PowerChina’s current investment in Nepal?

Sheng: PowerChina has carried out 11 projects in Nepal since entering the market in 1989, and most of them are hydro-electric stations. The $165.9 million Marsyandi-A hydro-electric station with installed capacity of 50 megawatts (MW), which started generating electricity on September 27, 2016, is the first hydropower project invested in by a Chinese company in Nepal.

Another hydroelectric project, the -65-MW Kaligandaki Upper hydroelectric station, has passed the local authorities’ environmental impact assessment and is under negotiation over power purchase agreements with local authorities. The total investment for the project is about $234 million.

We will keep exploring the market and follow up with several other hydroelectric projects.

GT: Why did PowerChina decide to invest in Nepal?

Sheng: Nepal is a landlocked mountainous country with abundant hydropower resources, yet the country has long had power shortages. The lack of electricity hampered the country’s economic growth. Nepal is estimated to have the potential of hydropower generating capacity of a total of 42,000 MW, but it only has installed capacity of 824 MW and has a power deficit of up to 800 MW in total.

Based on the current situation, we think that Nepal’s hydroelectric sector has full potential to grow, and this is one of the reasons behind PowerChina’s investment in Nepal.

Besides, Nepal’s abundant and inexpensive labor force, the popularity of English among its citizens, and the government’s favorable policies for private investment in the electricity sector also drew our investment.

GT: What are the benefits those investments brought to China and Nepal?

Sheng: The hydroelectric stations ameliorate Nepal’s chronic energy deficiency and optimize its power structure. For example, the electricity generated by the Marsyandi-A hydroelectric station, which will be handed over to the Nepalese government for nominal price after the 35 years of licensed operation ends, represents 5.72 percent of the country’s total supply.

The hydroelectric projects also help the Nepalese government turn its resource advantages into economic engines. In the long run, it not only accelerates the development of Nepal’s tertiary industry such as the transportation system but also provides job opportunities for the locals.

PowerChina’s investment in Nepal comes amid a growing number of Chinese enterprises “going global,” which can facilitate the exports of Chinese technology, equipment and labor to foreign markets. It also fits the government’s agenda to tighten economic cooperation with countries and regions along the “Belt and Road” (B&R) initiative.

GT: How’s the business environment in Nepal? Any challenges during the investment process?

Sheng: Nepal remains quite stable and safe despite its political power struggle. It also has a relatively sound legal system and a promising market.

However, there are certain challenges. For example, the massive earthquake that took place on April 25, 2015 seriously delayed the Marsyandi-A hydroelectric project, not to mention the subsequent Indian blockade of key border trade points with Nepal, which led to a shortage of essential goods and energies.

Also, the nation’s impoverished basic infrastructure, especially the under-developed electric transmission lines, as well as the frequent changes in government leadership and local authorities’ low efficiency have also posed difficulties to the project’s construction.

GT: What is the Nepalese government’s support for foreign investment? Do you expect more favorable policies in the future?

Sheng: Overall, the Nepalese government supports private and foreign investment. In the electricity sector, the local government has issued relevant guidelines and laws to offer favorable treatment to investors.

Economic ties between China and Nepal are also getting stronger under the B&R initiative. China and Nepal have signed agreements on avoidance of double taxation and bilateral investment treaties. When Nepal’s former prime minister Khadga Prasad Sharma Oli visited China in March, the two countries signed 10 agreements and memorandums of understanding, and this will further drive Chinese investment in Nepal.

However, some of the policies in the electricity sector were announced a long time ago and have had limited effect. So we hope that those rules can be amended to address the demand in different periods. Besides, we expect that the Nepalese government will keep supporting Chinese investors, offer more tax incentives, and simplify the procedures for importing and exporting electrical equipment.

Source : The Global Times