KATHMANDU, Jan 24:
Exim Bank of China has sent an initial positive response for the development of 750-MW West Seti Hydropower Project.
"We have received a letter expressing Exim Bank´s interest on West Seti. The bank has asked us to forward it a detailed project report (DPR) of the Projejt," a senior MoF official told Republica. He added that the ministry has already communicated with Ministry of Energy for forwarding the DPR to the Chinese lender.
Ministry of Finance (MoF) had approached the Chinese government seeking credit line for the development of West Seti along with Budi Gandaki Hydropower Project (600 MW) and Nalshyagugad Hydropower Project (400 MW) few months ago.
According to official records, harnessing the potential of the West Seti -- a large storage project -- is estimated to cost $1.60 billion. MoF had approached the Exim Bank of China for the loans investment after efforts to develop it with loan assistance from the Asian Development Bank failed.
The MoF, however, has not received any response on Budi Gandaki and Nalshyagugad. Development of those projects is estimated to cost $1.70 billion and $400 million respectively.
"It is too early to predict how the further development on West Seti will transpire," said the source.
Normally, Exim Bank evaluates the development project as rigorously as any lender, mainly concentrating on the rate of return and other financial parameters to be assured its loans will be repaid. If satisfied, it will then start negotiations with the government over matters like government´s counterpart fund, grace and repayment period, and rates of interest, among others. Even if things moved ahead smoothly, officials said the process could take some 6 to 12 months to give clear picture.
The government had floated West Seti for Chinese loans investment after West Seti Hydropower Limited (WSHL), a company promoted by Australia´s Snowy Mountain Engineering Corporation (SMEC), failed to manage the funding despite 10 amendments to the agreement over the last 14 years. The government had issued construction license to WSHL on June 27, 1997 and revoked it on July 27, 2011.
The company repeatedly sought extensions and had last asked for a grace period on Dec 24, 2010 to rope in investors, but the government did not oblige. SMEC had banked on the Asian Development Bank (ADB) and China National Machinery and Equipment Import and Export Corporation (CMEC) for financing. But both the lenders had pulled out, citing lack of good governance and investment-friendly environment in Nepal.
SMEC invested over $31 million in the project over the last decade as a major promoter but stopped funding office operations since August, 2010 after CMEC and ADB refused to invest in the project.