WEST SETI: New Strings

Investment Board Nepal (IBN) approves the Chinese company‘s proposal to develop West Seti, attaching strings

May 1, 2015, 5:45 p.m. Published in Magazine Issue: Vol: 08 No. -20 April 24- 2015 (Baishakh 11, 2072)

After approving the proposals of two Indian Companies on projects with capacity of almost 1500 MW power, in Upper Karnali, and Arun III, accepting all the terms and conditions, Nepal Investment Board has approves the project proposal of Chinese CWEI attaching many strings to it.

Although the government approves FDI for West Seti seeking investment, the strings attached on it showed that the IBN approved the proposal with reluctance.

According to IBN’s approval, NEA and CWEI have to register JV Company to begin study at the project site.  After almost a year’s delay, IBN approved the investment from China's CWE Investment Corporation (CWEI) to develop West Seti (750 MW).

Despite the claim of IBN officials that this should help move the project development forward, the strings attached on it will create more hurdles for project developers, given the current state of Nepal when even two Indian companies GMR and Satlaj, who received all facilities, are unable to initiate the work.

Chaired by prime minister Sushil Koirala, the board decided to direct the Chinese company and Nepal Electricity Authority (NEA) to register a joint venture company to develop the project, which has an estimated cost of Rs 160 billion or 1.6 billion dollars.

IBN has also fixed a fee for negotiation of Project Development Agreements at US$ 1,500 per proposed MW. It has also decided on a negotiation team for PDA signing with hydropower projects and any other project. However, fees for PDA negotiations were not set for Upper Karnali and Arun III.

The board meeting also authorized the IBN CEO to lead the PDA negotiations team which will include six other officials of the concerned ministries.

According to a proposal, NEA will have a stake of 25 percent in the equity portion and CWEI will inject the investment for the equity and bring in loan investment for the storage project being built in Baitadi, Bajura, Dadeldhura and Doti districts of the Far West.

CWEI is a subsidiary company of Three Gorges Corporation, a pioneer hydropower developer from China.China's Three Gorges Corporation Chairman Lu Chun had visited Nepal in the third week of March and met with the Prime Minister and other concerned people and had drawn the government's attention to need for support in the resettlement and rehabilitation of the families that would be displaced by the run-of-the-river project.

“The decision opens ground to start technical study of the project and help in beginning negotiations for the Project Development Agreement (PDA),” said Dr.Govind Raj Pokharel, vice chairman of National Planning Commission and member of IBN.

Following the signing of a Memorandum of Understanding (MoU) with CWEI in 2012 to develop the project for the domestic consumption purposes, there was a hue and cry. Then, Natural Resources Committee of Legislature Parliamentissued a strict order to Ministry of Energy to make a proper homework before implementing the MOU. The committee even recommended the Ministry should take action against those officials who prepared and signed MoU with Chinese Power Company.

The government led by Dr. Baburam Bhattarai transferred some senior officials from Ministry of Energy, including then minister. After this controversy, Investment Board Nepal (IBN) Act activated setting up the IBN under appointing Panta as CEO.

Although the government officials gave the reason earlier that the project got delayed because the issues like market of energy and development andconstruction of transmission lines, only a few people believe this given the event that occurred after signing MoU.

Chinese company has shown interest following signing of the Power Trade Agreement (PTA) with India by Nepal as selling the power to India has become an option and developer is also convinced of the market so far.

The formation of IBN curtails authority of the Ministry of Energy allowing it to implement and issue the license below 500 MW only. This decision made the institutions with country’s all high technicians defunct and a new institution with no manpower and technical expertise as a powerful entity.

Delayed for almost two decades, West Seti project now has a long way to go before its implemnation.

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