The fate of the West Seti Hydropower Project, which was thrown into doubt after its potential developer China Three Gorges Corporation (CTGC) said it would not go ahead with the scheme if the power purchase rate was not increased, will be decided at an upcoming meeting of the board of directors of Investment Board Nepal (IBN).
IBN has not decided what its next step will be, and wants to get a fresh mandate from its board which is chaired by the prime minister. During a meeting with IBN on Sunday, the Chinese company reiterated that the 750 MW storage project would not be bankable at the power purchase rate fixed by the government and asked the board to guarantee a 17 percent return on the project. As per the power purchase rate made public by the Energy Ministry in January 2017, reservoir-type projects like the West Seti will get Rs12.40 per unit during the dry season which lasts from December to May, and Rs7.10 per unit during the wet season which lasts from June to November.
The Chinese developer has also asked IBN to allow hydropower projects to sell electricity in convertible currency for a period of more than 10 years. As per the existing guideline, hydropower projects can sell electricity in convertible currency for a period of up to 10 years or until the project has repaid foreign debts, whichever is earlier.
CTGC’s demands have left IBN in a difficult position as state-owned power utility Nepal Electricity Authority (NEA), the sole buyer of electricity in the country, has clearly stated that it will not entertain a revision of power purchase rate. “We have now decided to take the issue to the board meeting of IBN which is chaired by the prime minister,” said a reliable source at IBN. “The board’s decision on the issue will be our official position regarding the project.”
West Seti has been in limbo since CTGC subsidiary CWE Investment Corporation and IBN signed a memorandum of understanding (MoU) to construct the hydropower project in August 2012. It took more than five years to sign a joint venture agreement between CTGC and NEA, its venture partner in the project.
As per the MoU, the Chinese company will have a 75 percent stake in the joint venture company while the NEA will hold the rest of the shares. The West Seti Hydropower Project will extend across Baitadi, Bajhang, Dadeldhura and Doti districts, and is expected to generate 2.8 billion units of electricity per year. The estimated construction time of the project, which will have a 207-metre tall dam, is six and a half years.
The scheme will cost $1.8 billion including interest charges incurred during the construction period and $1.4 billion excluding interest charges, according to the NEA. The two partners will invest in the project through their proposed joint venture company, West Seti Hydropower Project Development Limited.
From The Kathmandu Post