NEA, China Three Gorges close to signing JV dealThe Nepal Electricity Authority (NEA) and China Three Gorges Corporation (CTGC) are close to signing a joint venture (JV) agreement to develop the West Seti Hydropower Project as the Chinese company has agreed to arrange equity funding for the NEA, Investment Board Nepal (IBN) said.
The Nepal Electricity Authority (NEA) and China Three Gorges Corporation (CTGC) are close to signing a joint venture (JV) agreement to develop the West Seti Hydropower Project as the Chinese company has agreed to arrange equity funding for the NEA, Investment Board Nepal (IBN) said.
CTGC wrote to IBN last week that it was ready to insert the provision in the JV agreement following the NEA’s demand that the Chinese corporation be legally bound to arrange financing. West Seti, a much delayed scheme with a capacity of 750 MW, is located in the country’s far west.
As per the memorandum of understanding (MoU) signed between IBN and CWE Investment Corporation, a subsidiary of CTGC, in August 2012, the Chinese company will have a 75 percent stake in the JV company while the NEA will hold the rest.
Although CTGC had assured the NEA that it would help to obtain the $400 million required for equity investment as a soft loan from Chinese banks, it has not stated specifically when the loan deal will be concluded. IBN also said that CTGC officials would be arriving in Nepal very soon to sign the JV pact. “They have written that they will visit Nepal very soon to sign the JV agreement,” said the IBN source. “Since the NEA’s reservation has been addressed, chances are high that the deal will be signed this time.”
The NEA is also expecting to obtain the terms and conditions of the loan from CTGC before the JV agreement is signed. “What if the loan terms are not agreeable to the NEA?” said an NEA official involved in the negotiations with CTGC.
IBN received a draft JV agreement from CTGC some 11 months ago, but a deal has been elusive due to NEA’s reservations. The state-owned power utility cited lack of resources and a need to study the country’s power demand 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. However, it has shown greater interest in the project lately.
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 in the JV company and build a transmission line to evacuate the power generated by the plant. But no headway has been made on this front.