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China Three Gorges Seeks Guaranteed Return of 17 percent

Photo Credit : OnlineKhabar
NEA Managing Director Kulman Ghising signs the joint venture agreement with representatives of Three Gorges for the construction of West Seti Electricity Project, on Thursday, November 16, 2017.

China Three Gorges Corporation (CTGC), the developer of the West Seti Hydropower Project, has asked the government to guarantee a 17 percent return besides issuing a sovereign guarantee, reports The Kathmandu Post. The hydropower project is expected to generate 2.8 billion units of electricity per year.

The Details:

  • During a meeting with officials of Investment Board Nepal (IBN) on Sunday, representatives of CTGC said that the 750 MW storage-type project planned to be built in the far west region of Nepal would not be bankable at the power purchase rate declared by the government.
  • As per the power purchase rate made public by the Energy Ministry in January 2017, reservoir-type projects like the West Seti will get Rs. 12.40 per unit during the dry season which lasts from December to May, and Rs. 7.10 per unit during the wet season which lasts from June to November.
  • The Chinese developer also asked IBN to allow hydropower projects to sell electricity in convertible currency for a period of more than 10 years.
  • As per the existing guideline, hydropower projects can sell electricity in convertible currency for a period of up to 10 years or until the project has repaid foreign debts, whichever is earlier.
  • IBN has urged CTGC to take up the matter with the Nepal Electricity Authority (NEA), its venture partner in the West Seti project and the sole buyer of electricity in Nepal.
  • Meanwhile, the visiting officials of CTGC paid a courtesy call on NEA Managing Director Kulman Ghising on Monday and agreed to hold a tripartite meeting between the NEA, IBN, and CTGC.

What they are saying:

  • According to the NEA, the three-way meeting slated for Tuesday will be its last attempt to take the project forward with the Chinese developer. “We can’t ensure the rate of return demanded by the Chinese company; but as we are investing 25 percent of the project cost, financial viability is a concern for us too,” said a highly placed NEA source.
  • “We will ask them about the power purchase rate at which the project is bankable and review it.”

The Backstory:

  • Five years after CWE Investment Corporation, a subsidiary of CTGC, signed a memorandum of understanding (MoU) to construct the hydropower project in August 2012, CTGC and the NEA signed a joint venture agreement in November 2017 to implement the project.
  • As per the MoU, the Chinese company will have a 75% stake in the joint venture company while the NEA will hold the rest of the shares.
  • The West Seti Hydropower Project will extend across Baitadi, Bajhang, Dadeldhura and Doti districts.
  • The estimated completion time of the project is six and a half years.
  • According to the NEA, the scheme will cost $1.8 billion including interest charges incurred during the construction period and $1.4 billion excluding interest charges.

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