WHY HAVE NEGOTIATIONS TO SET UP A JV NOT GONE THROUGH? : West Seti Hydropower Project

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    Rounds of negotiations between Nepal Electricity Authority (NEA) and China Three Gorges Corporation (CTGC) failed to set up a joint venture company to build the West Seti Hydropower Project in Seti River.

    The negotiations were expected to prepare a mutually-agreed on document of about 40 pages for setting up a company and the plan was that the same would be signed during Prime Minister K P Sharma Oli’s China visit. But it failed to materialize. A few meetings between officials of NEA and CTGC were held even after Oli left for Beijing but nothing came of it. CTGC is a government-run company.

    Representatives of CTGC returned home without any conclusion and are expected to sit for another round of negotiates by the end of April, according to officials of the Investment Board Nepal (IBN).

    But a date for this next meeting to sort out the issue has not been confirmed yet. Republica has learnt that CTGC officials have said they need further permission from their higher ups to increase the set investment threshold for preparatory works for any projects to be developed in a joint venture company. Officials of the Government of Nepal are themselves confused about the latest issue from the China.

    A government source said CTGC representatives returned to discuss with their higher authorities and take permission on increasing the investment threshold but have not replied yet.

    IBN CEO Radhesh Pant said negotiations were in progress. “The Chinese side has returned for some policy clarity of their own and the issue will be settled soon to proceed,” Pant said.

    Full scale work on the study of the 750 MW reservoir plant project will only start after the establishment of the joint venture company. NEA owns 25 percent stake while CTGC has 65 percent and remaining 10 percent is allotted to the local and general people.

    Initially, NEA was reluctant about forming the company saying that it did not have the cash in needed to inject. According to a memorandum of understanding signed by the government with CTGC, the latter would help in bringing soft loans from Exim Bank of China for the investment from NEA.

    But the NEA board, led by energy secretary Suman Prasad Sharma, permitted the NEA management to negotiate just a few days before the PM’s China visit.

    CTGC has started some field investigations at the project site in the far western region but has faced problems due to lack of establishment of the company.

    Formation of the company paves the way for applying for a survey license at the Department of Electricity Development and to proceed in project development. During negotiations, NEA, though it has a minority stake, sought veto power on selling of shares as well as increasing of paid-up capital of the company. A source involved in the negotiations said that officials of CTGC will agree to this demand.

    Asked why there was no progress in formation of the company, NEA Deputy Managing Director Sher Singh Bhat declined to speak about it saying that the issue was under negotiations. Bhat is a key member in the negotiating team.

    The government signed an MoU with CTGC in 2012 to develop the project after seizing the survey license provided to Snowy Mountain Engineering Corporation (SMEC), an Australian company.

    Source : Republica