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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 project.
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.