The government is planning to offer one last chance to China Three Gorges Corporation (CTGC), the potential developer of the West Seti Hydropower Project, to start work on the reservoir-type scheme located in the country’s far western region.

Investment Board Nepal (IBN) is preparing to invite the Chinese hydropower developer for a discussion. The IBN office said it would soon invite CTGC for talks as mandated by a recent meeting of its board of directors chaired by Prime Minister KP Sharma Oli.

“We will probably dispatch a letter to the Chinese developer within a week,” said IBN spokesperson Uttam Bhakta Wagle. “We will hold final talks, and if we find them unwilling to take the project forward, the agreement signed with them will be terminated.”

The 750 MW West Seti project has been languishing in uncertainty after CTGC said it would not go ahead with the scheme if the power purchase rate was not increased. A few months ago, CTGC asked IBN to guarantee a rate of return of 17 percent on the project arguing that it would not be bankable at the power purchase rate fixed by the government.

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.

After hearing CTGC’s position, IBN formed a committee last March to suggest possible ways to break the stalemate. The panel urged IBN to either scrap the deal or allow CTGC to construct the project after slashing the installed capacity to 600 MW as the Chinese company had proposed more than a year ago.

During a meeting with IBN more than a year ago, the Chinese developer had proposed decreasing the installed capacity citing a drop in the water level in the river.

A recent study by the Nepal Electricity Authority (NEA), the state-owned power utility and venture partner of the Chinese company in the project, also showed that the installed capacity needed a downward revision to fulfil the minimum energy production requirement of 35 percent during the dry season due to a drop in the water level in the river.

IBN sources said the board would ask CTGC officials if they were serious about developing the project with the slashed installed capacity. “If they agree, CTGC will be allowed to proceed with the project,” said the source.

The West Seti has been in limbo since CTGC subsidiary CWE Investment Corporation and the IBN signed a memorandum of understanding to construct the hydropower project in August 2012.

It took more than five years to sign a joint venture agreement between CTGC and the NEA.

As per the pact, 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.