West Seti Hydropower Project in limbo as negotiations drag on

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    China Three Gorges Corporation (CTGC), the developer of the West Seti Hydropower Project, has been holding back on establishing a joint venture company in Nepal which has delayed construction work on the scheme.

    As per the memorandum of understanding (MoU) signed between the government and CTGC, it was supposed to form a joint venture company with the Nepal Electricity Authority (NEA) to develop the project.

    Last January, both parties had initialled a joint venture agreement which was to be ratified by their respective boards.

    The NEA board immediately approved the agreement, but the Chinese developer has been dillydallying and putting forward new demands repeatedly.

    Most recently, CTGC has sought clarification on the tariff structure of the multipurpose project. “On June 5, we received a letter from the Chinese developer asking us to clarify the rate it would get from the power purchaser if the project is developed as a multipurpose project,” said Madhu Prasad Bhetuwal.

    “We have forwarded the letter to the NEA as it is the venture partner of the Chinese developer and the buyer of the electricity generated by the project.” It seems like CTGC is considering turning West Seti into a multipurpose project, he added.

    The recently introduced power purchase agreement (PPA) guideline has clearly stated the different rates for different types of projects.

    However, in the case of multipurpose projects, the guideline says that separate negotiations should be held to fix the tariff rate.

    The Chinese company has recently written to the NEA asking it if it could assure a corporate guarantee from a second party or the NEA itself for a loan for the project.

    Responding to the letter, the NEA said it did not need a guarantor to borrow money to implement the scheme.

    State-owned power utility NEA said that no corporate guarantee was required to secure a loan as the project itself will be pledged as collateral.

    Last April, CTGC had also asked the NEA to clarify several issues before it ratifies the agreement signed between the two.

    At that time, the Chinese company sought assurance from the NEA regarding the purchase of the electricity generated by the 750 MW project.

    Then too, it had asked about the tariff structure. Similarly, the Chinese developer had expressed concern about the NEA’s financial health, and asked if it would be able to arrange equity financing for the portion of the total cost not covered by loans.

    “Every time the Chinese developer asked about the project, we have given a proper explanation,” said a highly placed IBN source. “Since it has been taking such a long time to ratify the JV agreement, we are doubtful that it will start construction and expedite the project soon.”

    The reservoir-type West Seti project, which will be spread over Baitadi, Bajhang, Dadeldhura and Doti districts, is being built at an estimated cost of $1.6 billion.

    Source : The Kathmandu Post