Tanahu Hydro Limited (THL), a wholly owned subsidiary of the Nepal Electricity Authority (NEA), and Sinohydro Corporation signed a memorandum of understanding on Sunday to implement the hydro and electromechanical works of the Tanahu Hydroelectric Project.

THL and the Chinese company expect to sign a contract for the construction of the 140 MW storage-type project soon.

Sinohydro Corporation was shortlisted as a potential contractor to execute the second package of the construction works which includes construction of waterways and a powerhouse at the project site. CMC Ravena of Italy also featured in the shortlist.

THL is executing the construction work with a loan assistance from the Japan International Cooperation Agency (Jica).

Meanwhile, THL has completed the technical and financial evaluation of the contractors bidding for the first package of the project which includes the formulation of a detailed design of the project and the construction of the headwork.

The company has forwarded the proposals of two companies to the Asian Development Bank (ADB) and another lender to the project for their approval, according to a reliable THL source. THL is yet to get the go-ahead from the ADB.

Although, THL had planned to appoint both contractors for the project by October 2017 and start construction by December 2017, it did not happen due to delays in the procurement process.

State-owned power utility NEA has almost completed the pre-construction works and an access road at the project site in Tanahu in central Nepal.

It has also made compensation payments to more than 90 percent of the landowners whose lands were taken over for the development of the reservoir project.

Meanwhile, the Tanahu Hydroelectric Project is preparing to sign a power purchase agreement (PPA) with the NEA. The draft PPA is ready and talks are being held with the NEA to finalise it. “Since the NEA is signing its first ever PPA with a storage-type project, it is taking some time,” said Pradip Kumar Thike, managing director of THL. “The agreement will probably be signed within a couple of weeks.”

As per the power purchase guidelines issued by the Energy Ministry and approved by the NEA board, storage-type projects like Tanahu Hydropower will be paid 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.

Tanahu Hydroelectric Project will be one of the biggest reservoir projects in the country with an estimated annual energy generation capacity of 587.7 GWh in the first 10 years of operation. The project can generate energy for six hours daily during the dry season. The project is being built using a credit facility extended jointly by the ADB, Jica and European Investment Bank (EIB).