Upper Karnali hydel project: IBN yet to decide on extension of financial closure deadline

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    The deadline to arrange funds for building the 900MW Upper Karnali Hydroelectric Project (PKHP) will expire on Sunday, but the concerned government body, which is overseeing the project’s implementation, is still undecided as to whether the time limit should be extended as demanded by the project developer.

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    By Sunday (September 18), the India-based GMR, the project developer, must submit a detailed plan to the Investment Board Nepal (IBN), the government agency which is overseeing the implementation of the PKHP, on how it intends to finance the project.
    In April, the GMR had written to the IBN seeking an extension of financial closure deadline by a year, citing supply disruption triggered by Tarai unrest and earthquakes last year.
    IBN Spokesperson Ravi Bhattarai said an IBN board meeting, which is chaired by the prime minister, was supposed to take a decision on the matter.
    “But there was a change in the government, and the new PM [Pushpa Kamal Dahal] was not available for the meeting due to his busy schedule,” said Bhattarai. “Currently, the prime minister and IBN chief executive are in India. A decision on the matter can be taken only after their return.”
    PM Dahal left for New Delhi on Thursday. IBN CEO Maha Prasad Adhikari is part of the PM’s delegation.
    The Project Development Agreement (PDA) signed between the GMR and IBN on September 2014 says the financial closure must be completed within two years of signing the pact. And, in case of inability on the part of the developer to complete the financial closure within the deadline, the government, as per the PDA, can either terminate the PDA or extend the deadline by a maximum of one year “if the developer can substantiate things were beyond its control in completing the task”.
    “We are not planning to terminate the agreement because Section 3.1.3 of the PDA allows the financial closure deadline to be extended automatically by a year if the developer furnishes valid reasons in writing,” said Bhattarai.
    However, the project developer has not expressed interest to use this facility to extend its deadline, and has instead tried to invoke the clause on political force majeure to prolong the time limit for financial closure.
    “If we accept the developer’s proposal, the deadline for financial closure may be extended till September 2018 because the company can make use of the facility on automatic deadline extension next year,” an IBN source said on condition of anonymity.
    Because of this, the IBN is reluctant to issue a letter on deadline extension to the developer, as it fears it can set a bad precedent, encouraging the developer to seek extensions again and again, multiple sources at the IBN said, adding, “But it is up to the PM to decide on the issue as he is the chairman of the IBN.”
    In New Delhi, IBN CEO Adhikari is likely to meet GMR officials. “GMR officials will try to convince Adhikari to extend the deadline using the clause on political force majeure,” said the source.

    Source : The Kathmandu Post