China Gezhouba Group Company (CGGC), the ousted contractor of the $2.5-billion Budhi Gandaki Hydropower Project, has called on the government to revisit its decision to terminate the contract, stating the process of its removal was “invalid”. 

The Chinese contractor, which was previously hired to build the 1,200-megawatt project, made the request through a letter sent to the Ministry of Energy. A copy of the letter has also been sent to Prime Minister Sher Bahadur Deuba.

The Chinese contractor has claimed that its “abrupt” ouster violated the terms of the memorandum of understanding (MoU) signed between the government and CGGC. Clause 9 of the MoU says: “Any party may terminate MoU, with reasons, anytime, by giving 30-day written notice to the other party.” “The government is entitled to exercise this right by remaining within the premise of the provisions of the MoU,” says the letter signed by CGGC authorised representative Yuan Zhixiong. 

“Since the MoU was not terminated in a valid manner, we believe, and you may also admit, that the MoU still exists and we are committed to doing our best to execute Budhi Gandaki Hydroelectric Project on time under the EPC&F model,” the letter, a copy of which has been obtained by the Post, further says. A Cabinet meeting held in May had decided to award the contract to build the project located in Gorkha and Dhading districts to CGGC. In June, the then energy minister Janardan Sharma and CGGC President Lv Zexiang had signed a MoU to build the project under the engineering, procurement, construction and finance (EPC&F) model. The agreement was signed in the presence of the then prime minister Pushpa Kamal Dahal and Chinese Ambassador to Nepal Yu Hong.

At the time of signing the MoU, the Chinese company had agreed to arrange soft or commercial loans from Chinese financial institutions to build the project under terms and conditions acceptable to the Nepal government. The government at that time had said a final agreement to hand over the contract would be signed if the Chinese company’s financial proposal was sound. 

But after around four months of signing the MoU, a joint meeting of the Agriculture and Water Resources Committee and Finance Committee of Parliament directed the government to scrap the agreement stating the decision to hand over the project to the Chinese company was against the country’s legal provisions and breaches the Public Procurement Act.

A Cabinet meeting held on November 13 then terminated the MoU sealed with the Chinese company citing “instructions of parliamentary committees”.The government had handed over the contract of the biggest reservoir project to the Chinese company without initiating a competitive bidding process. Although many had criticised this move at that time, major political parties, including Nepali Congress which is leading the government now, had remained silent about the issue. 

“Since the signing of the MoU, we have formed a team of 50 experienced experts and are reviewing the detailed project report prepared by Tractebel Engineering to prepare project proposals. We are also negotiating with Chinese financial institutions to arrange funds,” says the CGGC letter, adding, “Considering all the efforts we have made, we request you [the government] to revert the decision.”