China Three Gorges Corporation (CTGC), the developer of the West Seti Hydropower Project, has asked its joint venture partner Nepal Electricity Authority (NEA) to clarify several issues before it ratifies the agreement signed between the two. 

The Chinese company wants to make sure the NEA will sign a power purchase agreement (PPA) and buy the electricity generated by the 750 MW project. It has also asked the NEA how much it is willing to pay for the energy.

Likewise, CTGC has expressed concern about the NEA’s financial health, and has asked if it can arrange equity financing for the portion of the total funding not covered by loans.

CTGC recently sent a letter to the NEA through Investment Board Nepal (IBN), the project implementing authority, saying that its board will endorse the pact signed with the state-owned power utility after obtaining clarification on these points. 

IBN said that it had already forwarded the letter to the NEA. “Since the NEA is the concerned agency related to this project, we will write back once we get its reply,” said a highly placed IBN source. NEA Managing Director Kulman Ghising told the Post that they had received the letter and would be dispatching a reply addressing the concerns raised by its venture partner. “We are consulting with our lawyers and will reply soon,” he said. 

In August 2012, the government and CWE Investment Corporation, a subsidiary of CTGC, signed a memorandum of understanding (MoU) to construct the hydropower project located in the country’s Far Western Region. As per the MoU, the Chinese company will have a 75 percent stake in the joint venture company while the NEA will hold the rest of the shares.

CWE will allot 10 percent of its shares to locals residing around the project site. The company also holds the right to float shares to the public in Nepal. However, it must keep at least 51 percent of the shares, according to the joint venture agreement.

Last January, more than four years after the signing of the MoU, Ghising and the CTGC vice-president initialled a joint venture agreement which would be ratified by the boards of the respective organizations. The NEA board immediately approved the agreement, but the Chinese company has been holding back citing varied concerns. 

The reservoir-type West Seti project is being built at a cost of $1.6 billion. Although the original installed capacity of the project is 750 MW, the Chinese developer has proposed a downward revision to 600 MW citing decreased water levels in the river. After the NEA rejected CTGC’s proposal, the Chinese developer sent a high level team of hydrological experts to the project site to take measurements of the water level in the Seti River.