Tuesday, July 26, 2011

West Seti Hydropower Co poised to lose licence

West Seti Hydropower Co poised to lose licence
Mukul Humagain
Kathmandu, Jul 26, 2011

It's going to be curtains down for the much talked about West Seti
Hydropower Company Limited (WSHPL). Fifteen years after it acquired
survey licence for the 750 MW West Seti Hydropower Project, WSHPL is all
set to lose the licence.

A high-level official at the Energy Ministry said the ministry has
already recommended to the government to scrap WSHPL's licence. "The
ministry has already forwarded the decision to the Cabinet," said the
source. According to the source, the upcoming Cabinet meeting would take
a decision to this effect.

Of late, Energy Ministry officials have been hinting at WSHPL's licence
annulment. The government in June had sought WSHPL's clarification on
why should it not be closed. The government then had said that it would
move ahead with the licence cancellation process if the company failed
to come up with a reasonable answer.

The scrapping of WSHPL would mark the end of the country's one of the
ambitious hydropower projects. The project was originally designed as an
export-oriented with 90 percent of the power to be exported to India.
However, promoter WSHPL failed to move ahead with its construction whose
cost was estimated at Rs 120 billion.

Failing to manage resources, WSHPL had proposed building the project
under Public Private Partnership (PPP) model in January, 2011. The
company had filed an application at the Department of Electricity
Development (DoED) seeking extension of the deadline for financial
closure of the project and also sought the government's involvement in
the project.

However, indicating that it would not extend the deadline, the Ministry
of Energy (MoE) had sought the clarification from WSHPL for its failure
to proceed with the construction of the project located in Doti and
Dadeldhura districts.

WSHPL in its clarification to the government had said the government
cannot terminate the agreement it reached with the company without
giving a six-month notice. The company had also stated that it was
trying to manage resources for the project.

WSHPL had signed an agreement with the government 16 years ago to
construct the project under the build-own-operate-transfer (BOOT) model.

Australia's Snowy Mountains Energy Corporation (SMEC) was the major
promoter of the project.

The cash-strapped project got a boost when the China National Machinery
and Equipment Import and Export Corporation (CMEC) decided to invest in
it. CMEC even signed an agreement with WSHPL during the then Prime
Minister Madhav Kumar Nepal's China visit in 2009. CMEC President Jia
Zhiqiang and WSHPL Director Himalaya Pandey had signed a memorandum of
understanding in Beijing. The Chinese firm had decided to invest Rs 15
billion in the project.

However, CMEC later opted to pull out of the project saying that Nepal
lacks an investment-friendly environment. Another important shareholder
of the company, Asian Development Bank, also did not show interest
citing lack of public acceptance of the project and lack of good governance.

The project received yet another jolt when the main promoter of the
company SMEC stopped sending funds for office operations in August 2010.
SMEC's decision to stop funding was linked to the lack of interest shown
by CMEC and ADB to pour in money in the mega project. SMEC, as the major
promoter, has invested over $ 31 million in the project over the last

Posted on: 2011-07-26 10:28

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