NEA, China’s CWE moving closer on West Seti project

- BIBEK SUBEDI, Kathmandu
As per the MoU signed between IBN and CWE in August 2012, the Chinese company will have a 75 percent stake in the JV company

Mar 16, 2016-The Nepal Electricity Authority (NEA) and China’s CWE Investment Corporation are moving closer to signing a joint venture (JV) agreement to construct the 750 MW West Seti Hydropower Project. Officials of the Chinese company are scheduled to visit Nepal to a hold final round of meetings with the NEA to establish a JV company.

Senior officials of Investment Board Nepal (IBN) said the Chinese team would be arriving on Thursday. Cash-strapped NEA has been stalling signing a JV agreement citing inadequate resources to be an equity partner. 

“If the meeting leads to the finalization of the JV template, IBN plans to conclude the JV agreement during Prime Minister KP Oli’s visit to China next week,” said a senior IBN official. “However, since the NEA is the signing authority in this proposed deal, its success depends on its seriousness.” Top NEA officials refused to comment on the latest development.

As per the memorandum of understanding (MoU) signed between IBN and CWE in August 2012, the Chinese company will have a 75 percent stake in the JV company while the NEA will hold the rest of the shares. 

Despite getting a draft of the JV agreement from CWE some nine months ago, IBN has been struggling to seal the deal due to the NEA’s reservations. The state-owned power utility body cited lack of resources and a need to study the country’s power demands when the hydro plant is projected to be completed. As the NEA is the sole power buyer, it is worried about possible losses due to surplus electricity.

The NEA said it did not have the guidelines to sign a power purchase agreement with a storage-type project. Almost all of Nepal’s hydropower projects are of the run-of-the-river type.

IBN is keen to finalize the JV agreement as Prime Minister Oli is scheduled to visit the northern neighbour next week. It has written to the Prime Minister’s Office, the Foreign and Energy ministries and the NEA asking them if it would be possible to sign the pact during the Prime Minister’s visit. 

The NEA has shown greater interest in the project lately. Officials said that the draft JV agreement was at the final stages. “At this point, we are about to present the draft to the NEA board,” said Mukesh Kafle, managing director of the NEA. “Once the board approves the draft, it will be presented to CWE Investment Corporation.”   

IBN also said that the NEA was moving faster to sign the JV accord. “We have found them to be more positive regarding the agreement lately,” said an IBN source.   

The West Seti project is estimated to cost $1.6 billion. In April 2014, the Finance Ministry had written to the Chinese government asking for $400 million in soft loans to allow the NEA to be an equity partner and build a transmission line to evacuate the power generated by the plant. But no headway has been made on this front.

Published: 16-03-2016 08:05

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