Tuesday, August 30, 2011

$1.6b Chinese loan for West Seti Hydel Project

$1.6b Chinese loan for West Seti Hydel Project


August 30, 2011

KATHMANDU, Aug. 30 -- China has agreed to provide loan worth $1.6
billion for the much talked about West Seti Hydropower Project. The
northern neighbour is investing in Nepal's hydropower sector for the
second time after Upper Trishuli 3A.

Outgoing Energy Minister Gokarna Bista said Beijing has agreed the loan
for the 750 MW project. :We could have signed a memorandum of
understanding (MoU) with China Exim Bank for the project had our
government stayed a bit longer," said Bista.

After estimating financial capabilities of interested countries, the
government has concluded that only China can build this project. The
Chinese government, through the China Exim Bank, has already provided
loans worth around Rs 9 billion for the 60 MW Upper Trishuli 3A.

Following the annulment of West Seti's licence on July 28, the
government had said that it would build the project itself. The project
had acquired the licence 16 years ago.

The government had made a formal request to China for financing West
Seti during the recent Nepal visit of the 60-member Chinese delegation
led by Zhou Yongkang, a powerful member of the Standing Committee of
Chinese Communist Party (CPC). The Chinese side had told Nepal to send
the Detailed Project Report to China.

Energy Secretary Balananda Poudel said Nepal had requested China to
provide the entire amount ($1.6 billion) as concessional loan. "However,
China has said that the loan amount will be a combination of soft and
commercial loan," said Poudel.

Earlier, the China Exim Bank had said the interest rate on commercial
loan would be at seven percent. Now, Poudel says the rate will be below
five percent.

Following the termination of West Seti's licence, the Ministry for
Energy had suggested three options to the government for the
construction of the project. "We'd asked the government either to build
on its own or find a loan for the project," said Poudel. "The third
option was to call a global tender."

Chinese interest in West Seti is not new. Earlier this year, China Three
Gorges Corporation (CTGC), operator of the Three Gorges Project (21,000
MW) had written to the Prime Minister's Office expressing its interest
to invest in the West Seti Project. The CTGC had also offered its help
in getting funds from the Chinese government for the project.

The project located in Doti and Dadeldhura districts is seen as the key
project or the industrialisation of the Far-West Region. Energy Ministry
says it is yet to decide on the modality for construction of the
project. "It can be built either by forming a committee or by Nepal
Electricity Authority," said Bista.

West Seti 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 the construction that was estimated to cost Rs 120
billion. WSHPL, after failing to manage resources, had proposed
developing the project under the 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 and also sought the government's involvement in the

WSHPL had signed an agreement with the government 16 years ago to
construct the project under the Built-Own-Operate-Transfer (BOOT) model.
Australia's Snowy Mountains Energy Corporation (SMEC) was the major
promoter of the project. The project received a major jolt when the main
promoter 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 China National Machinery and Equipment Import and Export
Corporation (CMEC) and Asian Development Bank (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 decade. Published by HT Syndication
with permission from EKantipur.com. For any query with respect to this
article or any other content requirement, please contact Editor at

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