Following the footsteps of Melamchi Water Supply Development Board, Tanahu Hydropower Limited — the developer of Tanahu Hydropower Project — has terminated the contract signed with Cooperativa Muratori e Cementisti di Ravenna (CMC), the Italian contractor appointed to execute one of the components of the power plant. The project developer on Tuesday dispatched the termination letter to the Italian contractor after it failed to mobilise the work force at the project site despite repeated directions from its employer.

Tanahu Hydropower Limited, the wholly owned subsidiary of Nepal Electricity Authority (NEA), the state-owned power utility in October selected CMC to execute an important component of the $550 million plant located in central Nepal. Subsequently, the project developer gave the contract commencement letter to the Italian firm, asking it to send workers to the construction site and start work by February 11, 2019. However, the CMC refused to comply with the commencement date given by the employer and asked it to release the advance payment first.

The project developer, according to its Managing Director Pradeep Kumar Thike, couldn’t release the advance payment as the Italian contractor didn’t submit the full bank guarantee to qualify for such payment. “Therefore, we had no other option but to send the contract termination letter to the CMC,” said Thike. “Now, we will initiate a new process to appoint another contractor for the job.”

Another source at the Tanahu Hydropower told the Post that the Italian contractor had no intention to start work since the day it won the contract. “Therefore, our board of directors directed the management to terminate the contract,” said the source.

The CMC ran into serious liquidity problems after Tanahu Hydropower signed a contract with the Italian and Chinese firms for the two packages of the hydropower plant.

The recent development means a delay in construction of the 140MW storage type project, which has been divided into two components with a contractor for each package. Although Sinohydro Corporation, the Chinese contractor hired to execute the hydromechanical and electromechanical works under the second package of the project has already mobilised the workforce at the project site, the construction of the entire project will be affected as the tasks of the two contractors are interrelated.

As hiring a new contractor will take at least six months, the construction of the project will be seriously affected, according to sources at the Tanahu Hydropower Limited.  

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. Tanahu Hydropower 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.