West Seti hydro plan (Nepal): Govt to seek $1.6bn Chinese loan

West Seti hydro plan: Govt to seek $1.6bn Chinese loan
The Kathmandu Post, Posted on: 2011-08-11
www.ekantipur.com/the-kathmandu-post/2011/08/10/top-story/w-seti-hydro-plan-govt-to-seek-1.6bn-chinese-loan/225026.html

Anil Giri, KATHMANDU, AUG 10 -
The government will formally request China for US $1.6 billion in loan to
construct the much-hyped 750 MW West Seti Hydro Project Limited (WSHPL).
The development follows Chinese assurances to provide assistance should
the government formally request so, government sources said.

"After estimating the financial capabilities of interested countries and
firms, we have concluded that only China can build this project. In this
regard, we will make a formal request to China," a senior Finance Ministry
official told the Post. The request will be made during the visit here of
a Chinese delegation led by a Communist Party official next week. Zhou
Yongkan, who ranks ninth in the powerful Politburo Standing Committee, is
arriving with a 60-member delegation on August 16 with an economic
package, according to officials.

A Chinese team led by Director General of the Chinese Ministry of Water
Resources and Irrigation, Gao Bo, is already in the Capital. The team held
talks with Energy Secretary Bala Nanda Poudel, Irrigation Secretary Tana
Gautam and Director General of Irrigation Department Anil Pokhrel on
Wednesday. The Nepali side apprised the Chinese officials of their
preparations. On July 27, the Cabinet revoked the licence of West Seti
Hydropower Limited held by Australia's Snowy Mountain Engineering Corps
(SMEC) and decided that the Energy Ministry should develop the project
itself. The company had acquired the licence in 1996.

The Ministry of Finance carried out a study of potential institutional
lenders and zeroed in on China, according to sources. The Ministry of
Energy revised the estimated current cost of the project to US $ 1.6
billion.

"It would be a government-to-government deal," a senior Energy Ministry
official said. "We are in the last stages of readying the technical
proposal that will be forwarded later to the Ministry of Finance."

In 2009 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 visit of
then Prime Minister Madhav Kumar Nepal to China in 2009. CMEC President
Jia Zhiqiang and WSHPL Director Himalaya Pandey had signed a memorandum of
understanding (MoU) in Beijing. The Chinese firm had decided to invest Rs
15 billion in the project.

However, CMEC later opted out of the project saying Nepal lacks an
investment-friendly environment. Another important shareholder of the
company, Asian Development Bank, also declined citing lack of public
acceptance of the project and issues of good governance.

In May this year, China Three Gorges Corporation (CTGC), a corporation
running one of the world's biggest hydro power projects, sent a letter to
Prime Minister Jhala Nath Khanal expressing its interest in the West Seti
while offering 'flexible conditions' to develop the project.
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