West Seti hydropower project: Nepal, China put initials on joint venture pact


    Jan 17, 2017- In what seems to be a major breakthrough in the development of West Seti Hydropower Project, Nepal Electricity Authority (NEA) and China Three Gorges Corporation (CTGC) on Monday put the initials on a joint venture (JV) agreement to build one of the largest reservoir type hydro projects.

    NEA Managing Director Kul Man Ghishing and Vice President of CTGC signed on the document here in Kathmandu. The agreement is subject to approval by the boards of both the companies.

    The government and CWE Investment Corporation, a subsidiary of CTGC, had signed a memorandum of understanding in August 2012 for the development of the project located in the far-western region of the country.

    Sanjay Dhungel, senior divisional engineer at the Investment Board Nepal (IBN), which is overseeing project’s implementation, said both sides have principally agreed to finalise and formalise the JV agreement at the earliest. “We haven’t discussed the nitty-gritty yet,” Dhungel said.  According to Dhungel, 75 percent of the equity in the JV company will be acquired by CWE and the rest by NEA. This shareholding structure is in line with the memorandum of understanding signed in 2012 for the project development.

    Out of the 75 percent equity, CWE will allot 10 percent shares to locals residing around the project site. CWE also holds the right to float shares to the public in Nepal. “However, the CWE should hold at least 51 percent stake in the company,” Dhungel said.

    According to a source, the JV agreement has addressed issues raised by NEA, which had remained adamant on a number of issues before agreeing to become an equity partner in the project.

    Earlier, NEA had said it may not be in a position to make its voice heard in the JV company because of its status as a minority stakeholder.

    “To make sure that NEA’s voice is heard, as many as 22 crucial issues have been figured out wherein consent of NEA will be required before making any decision,” the source said. As per the initialed document, the fund that NEA needs to inject in the company will be determined on the basis of past studies, while CWE has also expressed commitment to help NEA find funding sources.

    Although the project was initially supposed to have an installed capacity of 750 MW, there is uncertainty over its electricity generation capability now, as the Chinese developer has proposed downward revision of the installed capacity stating that the water level in the river basin has dropped in recent years.

    The decision over installed capacity, however, will be taken jointly by both the partners, the source said.

    The Chinese company had sent a draft of the JV agreement around one and a half years ago. The IBN, however, had paid no heed to the document designed by the Chinese company and instead developed a new one. This was one of the reasons why it took much longer for the JV pact to be initialed.

    According to Madhu Prasad Bhetwal, joint secretary at the IBN, both NEA and CTGC were flexible during the negotiations to ensure that they move a step further in the process of developing one of the largest reservoir type projects in the country.

    Source: The Kathmandu Post