IBN considers extending financial closure deadlineThe Investment Board Nepal (IBN) is considering providing extra time to the developer of 900MW Arun III Hydroelectric Project to complete the process of arranging funds.
The Investment Board Nepal (IBN) is considering providing extra time to the developer of 900MW Arun III Hydroelectric Project to complete the process of arranging funds.
The deadline to complete the project’s financial closure expires on November 24. The developer has sought a one-year extension to the deadline, citing various reasons, including the government’s inability to facilitate the land acquisition process.
“We might not offer a one-year extension to the deadline as demanded by the project developer, but we will assess the situation and award the extension accordingly,” a highly-placed IBN source told the Post. “A proposal on
deadline extension will be tabled in the upcoming board meeting.”
IBN is positive about extending the deadline for financial closure, as SJVN Arun-III Power Development Company (SAPDC) is a subsidiary of SJVN India, an Indian state-owned company, and it will not face problems in arranging funds to build the project, according to the source.
“The developer has informed the IBN that it has already asked its parent company to arrange funds for the project,” said the source. “They have also said SJVN India’s board has prepared a proposal on financial closure and are taking it to the Indian Cabinet soon.”
The developer, which will export the electricity produced from the project to India, has pledged to provide 21.9 percent of the energy (worth an estimated worth Rs155 billion) free of cost to Nepal, plus another Rs107 billion in royalties.
In total, Nepal will receive Rs348 billion from the project over the 25-year concessional period.
As per the Project Development Agreement (PDA) signed between IBN and SAPDC on November 24, the developer has to submit a detailed plan on how it is going to finance the project within November 24 and complete the construction of the plant and start energy generation by 2021. However, in the end of August, SAPDC wrote to IBN seeking a one-year extension to the financial closure deadline.
“In the letter, the developer mentioned it could not proceed ahead with regular works in a timely manner last year because of the shortage of fuel and other commodities,” IBN CEO Maha Prasad Adhikari said. “Also, the developer pointed out the government’s inability to acquire forest land for the project.”
SAPDC is second hydropower developer after GMR Upper Karnali Hydropower Project to ask for extension to financial closure deadline. GMR, the developer of 900MW Upper Karnali hydroelectric project, too had written a similar letter to IBN in April seeking a one-year extension to the deadline.
As per the PDA signed between IBN and GMR, the latter was supposed to complete the financial closure by September 18. In the case of GMR, the IBN is still indecisive on whether to grant the extension.