Tanahu Hydropower Limited has given a contract commencement date to the two companies hired for the execution of the 140MW Tanahu Hydropower Project.

The project developer, a subsidiary of the state-owned Nepal Electricity Authority, on Wednesday directed CMC Ravenna of Italy and Sinohydro Corporation of China to mobilise workers for the project within 28 days.

Despite issuing the commencement date, Tanahu Hydropower Limited (THL) is doubtful if the construction of the storage project will begin on the time as CMC Ravena, the Italian contractor has landed into a liquidity problem.

After THL signed the contract with the Italian and Chinese firms back in October to execute two packages of the hydropower project, the Italian company landed into serious liquidity problems.

As per the contract, CMC Ravena has to implement the first package of the hydropower plant, which includes the formulation of a detailed design and the construction of the headworks while Sinohydro Corporation has to execute the hydromechanical and electromechanical works under the second package.

 “As we have already signed a contract with CMC Ravena, it was our contractual obligation to give them the commencement date although we are doubtful if the Italian contractor will actually start working,” said Pradeep Kumar Thike, NEA appointed managing director at the THL. “However, if the contractor fails to start construction by the commencement date, we will initiate the process to terminate their contract.”

Also, the project developer is paying close attention to CMC’s case in an Italian court. On December 7, the Court of Ravenna gave 60 days to CMC Ravenna to settle its debts. In case it fails to settle its debts, the contractor will be declared insolvent, paving the way for the THL to terminate the contract, according to Thike. “However, if CMC Ravenna isn’t declared bankrupt, the THL will take further steps based on the Italian contractor’s action,” he said.

The THL has also denied advance payment to the Italian contractor as the developer fears the contractor might flee the country without executing the work. “Unless CMC deposits a performance guarantee at one of the Nepali banks, we will not release the advance payment,” Thike said.

The Tanahu Hydropower Project will be one of the biggest reservoir-type projects in the country, with an estimated annual energy generation capacity of 587.7 gigawatt hours in the first 10 years of operation. The project can generate energy for six hours daily during the dry season.

The THL is developing the project using a credit facility extended jointly by the Asian Development Bank, Japan International Cooperation Agency and European Investment Bank. The project is estimated to cost $550 million.