Tanahu hydro delayed by pending loan deal

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    KATHMANDU, DEC 10

    upper SetiFinancial closure of the prioritized Tanahu Hydropower Project has been held up due to delays in signing a loan agreement with the Abu Dhabi Fund which has pledged US$ 30 million to build it.

    The 140 MW project is planned to be built on the Seti River in Tanahu district in the Western Region. It will be one of Nepal’s biggest storage-type project.

    Three of the four donors, the Japan International Cooperation Agency (JICA), Asian Development Bank (ADB) and European Investment Bank (EIB), have already signed loan deals with the government. Once the pact is signed with the Abu Dhabi Fund, investment for the project will be fully assured.

    Finance Ministry officials said the proposed accord with the Abu Dhabi Fund has been delayed due to its insistence on inserting the word “ratification” and on drawing it up in the Arabic language.

    Since inserting the word ratification in the pact would require it to be approved by Parliament, the government is unwilling to accept the proposal.

    Nepal’s Treaty Act gives the government full authority to sign loan agreements with foreign countries without involving Parliament.

    “We can consider the proposal to sign the agreement in Arabic,” said the ministry official. “But our insistence has been on signing it in English.” Meanwhile, Madhu Marasini, chief of the international economic cooperation coordination division, confirmed that the loan agreement with the Abu Dhabi Fund was being held up due to a disagreement over the wording.

    “We had planned to sign the agreement with Abu Dhabi at the same time as the other donors,” he said.

    Among the donors to the project, JICA has pledged 15.137 billion Japanese yen (US$ 147 million), the ADB has agreed to provide US$ 150

    million and the EIB has promised 55 million euros (US$ 76 million).

    The project is estimated to cost US$ 505 million. The Nepal government will invest US$ 71 million in the project.

    The Nepal Electricity Authority (NEA) has begun developing reservoir type projects after forming a subsidiary. According to NEA officials, preparation of the design and construction of a bridge has begun at the project site. The environmental impact assessment was done in 2009.

    As per the project’s estimated cost, it will need to sign a power purchase agreement with the NEA for Rs 7 per unit. The government has said that it will extend credit to the NEA at an interest rate not higher than what the donors are charging.

    However, the government will charge the NEA 1 percent of the loan amount as processing and guarantee fees. The NEA will have to bear the risk of fluctuations in the exchange rate.

    Source : The Kathmandu Post