PDA negotiations on Upper Trishuli-1 to begin on Jan 14

KATHMANDU:

Negotiations on signing of a crucial agreement required for development of the $550-million Upper Trishuli-1 hydroelectric project will begin within the next two weeks.

The Ministry of Energy will start holding talks on drafting the project development agreement (PDA) with Nepal Water and Energy Development Company (NWEDC), the developer of the 216MW hydroelectric project, from January 14.

“We hope to conclude the negotiations within March following which contractors will be hired to begin construction works,” NWEDC liaison manager Pradeep Gangol said.

The PDA is a crucial document for developers of hydro projects as it sets out obligations of the government as well as project developers and protects the interests of both the parties until projects developed under Build, Own, Operate, Transfer (BOOT) model are handed over to the government. Financial institutions in the country and abroad extend loans to build hydro projects based on content of the PDA.

“By the time PDA negotiations are complete, we hope to sign power purchase agreement with Nepal Electricity Authority as well,” Gangol said. “Then in April we are planning to officially hand over engineering, procurement and construction, and operation and maintenance contracts.”

NWEDC obtained the survey licence for the run-of-river type Upper Trishuli-1 project in January 2006.

“We then submitted the survey report within the stipulated five-year period while applying for generation licence, but the government said some of the documents were missing, which created a delay,” Gangol said.

The project then got dragged to court, with filing of a public interest litigation that sought revocation of the survey licence issued to the project developer claiming the company had failed to come up with a survey report within the deadline.

The Supreme Court, in August 2012, then ruled that there was no need to issue a stay order in the case, which paved the way for the project developer to continue its work. Then in October 2012, the government signed the contract agreement with NWEDC, which paved the way for commencement of PDA negotiations.

However, PDA negotiations could not begin due to a controversial provision in the government’s PDA Working Procedure issued in January that made it mandatory for shareholders to show net-worth equivalent to 50 per cent of their stake in the project.

Although the provision did not affect foreign investors, it troubled Nepali investors, as they could not show possession of properties worth hundreds of millions of rupees. The government

in October changed the condition, allowing shareholders to show collective net worth equivalent to only 25 per cent of their share in the project.

Following this, the government renewed the contract agreement with project developer in November.

However, another public interest litigation has recently been filed at the Supreme Court demanding that the government roll back its decision to renew contract agreement as ‘the apex court is yet to deliver final verdict on case filed in August 2012’.

“Despite these hurdles, we have been meeting most of the deadlines set by the government,” Gangol said. As of now, NWEDC has completed environment impact assessment study, completed detail design works, started constructing 15km access road at a cost of $19 million, started carrying out initial environmental examination to build transmission lines, and signed connection agreement with Nepal Electricity Authority.

The project is 50 per cent owned by South Korea’s state-owned Korea South East Power Company.

Likewise, South Korea’s Daelim Industrial Company and World Bank’s International Finance Corporation own 15 per cent stake each. The remaining 20 per cent stake is equally owned by Kyeryong Construction Company and Nepali investor Bkesh Pradhananga.

Source: THT