NEA invites CTGC to sign joint venture dealThe Nepal Electricity Authority (NEA) has invited representatives of China Three Gorges Corporation (CTGC) to visit Kathmandu by October-end to seal their long-delayed joint venture deal so that the construction of the 750 MW West Seti Hydropower Project can begin.
The Nepal Electricity Authority (NEA) has invited representatives of China Three Gorges Corporation (CTGC) to visit Kathmandu by October-end to seal their long-delayed joint venture deal so that the construction of the 750 MW West Seti Hydropower Project can begin.
The state-owned power utility has written to CTGC saying that it will try to resolve the causes of dissatisfaction during the visit. The NEA was responding to CTGC’s letter sent to Investment Board Nepal (IBN) last September. In the letter, CTGC had said that its board had decided to endorse the joint venture agreement made with the NEA in January.
The Chinese company has also sought clarity on a number of issues including capitalization of pre-incorporation expenses, modality of issuing shares to locals and the power purchase rate for the electricity generated by the project.
“We dispatched the letter to the Chinese company via IBN on October 4,” said Prabal Adhikari, spokesperson for the NEA. “As a majority of the Chinese company’s concerns have already been addressed, there is a high chance that the deal will be sealed during the visit.”
Meanwhile, Nepal Rastra Bank (NRB) has issued a directive allowing foreign companies developing infrastructure projects in Nepal to factor in the cost incurred prior to their establishment as paid-up capital. According to NRB’s directive, foreign companies constructing national pride projects and those that have received investment approval from IBN are eligible to receive this facility.
“As per the central bank’s directive, the Chinese company is eligible to receive this facility,” said an IBN official.
Likewise, the Chinese company is concerned that the proposed joint venture company will automatically become a public limited company requiring greater disclosure and compliance if shares are issued to the general public.
“We will convince visiting CTGC officials that a proper mechanism will be developed before the company is formed so that it will not have to go public,” said the IBN source.
Similarly, the power purchase rate, according to the NEA, will be set as per the guidelines issued by the Energy Ministry in January. According to the guidelines, reservoir type projects like the West Seti will get Rs12.40 per unit during the dry season (December to May) and Rs7.10 during the wet season (June to November).
In August 2012, IBN and CWE Investment Corporation, a subsidiary of CTGC, signed a memorandum of understanding to construct the West Seti Hydropower Project. As per the pact, the Chinese company will have a 75 percent stake in the joint venture company while the NEA will hold the rest of the shares.
More than four years later, NEA chief Kulman Ghising and the CTGC vice-president initialed a joint venture agreement which had to be ratified by the boards of their respective organizations. The NEA board immediately approved the agreement, but the Chinese developer took around eight months to make conditional endorsement.
The reservoir-type West Seti project, which will be spread over Baitadi, Bajhang, Dadeldhura and Doti districts, is being built at an estimated cost of $1.6 billion.