A joint venture agreement signed between the Nepal Electricity Authority (NEA) and China Three Gorges Corporation (CTGC) to build the West Seti Hydropower Project is likely to be scrapped due to differences over the power purchase rate.

The state-owned power utility has balked at hiking the price at which it will buy electricity from its Chinese partner after the proposed $1.8 billion plant in far west Nepal comes online.

Last December, CTGC, the potential builder of the 750 MW reservoir type project, wrote to Investment Board Nepal (IBN) threatening to pull out if the NEA doesn’t revise its guidelines regarding the power purchase rate. The Chinese company has said that the rate offered by the guideline doesn’t make the project bankable.

NEA Managing Director Kulman Ghising told the Post that they would not revise the power purchase rate issued by the Energy Ministry and approved by the NEA board in January 2017 as demanded by their Chinese venture partner.

“IBN has not communicated to us about the issue officially, but we can’t change the power purchase rate for a single project. Although we are CTGC’s venture partner, they have never discussed the estimated cost of the project with us,” said Ghising. “During our last meeting in November, we had stated that the rates mentioned in the power purchase guideline would not be changed.”

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.

IBN, the implementing agency of the project, is planning to hold talks with both the NEA and the Chinese developer. “We are trying to resolve the issue by holding talks with both parties,” said Maha Prasad Adhikari, CEO of IBN, without specifying when they would be getting together. CTGC and the NEA signed the joint venture agreement to implement the project less than two months ago. In August 2012, the government and CWE Investment Corporation, a subsidiary of CTGC, signed a memorandum of understanding (MoU) to construct the hydropower 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. But it took more than five years to establish the company.

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.