GMR seeks more time

GMR seeks more time

  • Financial closure of Upper Karnali Hydropower Project



Jul 18, 2017-

GMR Upper Karnali, the developer of the Upper Karnali Hydropower Project, has asked for more time to conclude financial closure citing delays by the government to provide forest land which have put off potential investors. The company has around two months to arrange funding to build the 900 MW hydropower project in western Nepal. It has written to Investment Board Nepal (IBN) requesting an extension of the deadline.

“We have received a letter from the developer requesting an extension,” IBN CEO Maha Prasad Adhikari told the parliamentary Agriculture and Water Resources Committee. “The developer has pointed to the Nepal government’s failure to provide forest land required for the project as the major reason behind its inability to conclude financial closure.” Although Adhikari didn’t reveal the length of the deadline extension sought by the Indian company, informed sources at IBN said it had asked for one more year to arrange capital to construct the project.

This is the second time the Indian developer has asked for an extension of the deadline for financial closure, and IBN is reluctant to grant another deferral.

As per the project development agreement (PDA) signed between IBN and GMR in September 2014, it was required to complete financial closure by September 2016. But IBN deferred the date to September 2017 following a request by the Indian company.

“We don’t want to provide another deadline extension,” said Adhikari. “But there is a problem from our side as recent guidelines on forest land clearance issued by the Forest Ministry have made it difficult for developers to acquire forest land to build infrastructure projects.” The guidelines require the developer to provide compensation for the whole area affected by the project which conflicts with the provision stated in the PDA. The PDA requires a developer to pay compensation only for the land where permanent structures like powerhouse and dam are built. According to the PDA, developers only had to pay a lease fee for the rest of the land affected by the project.

Similarly, developers are required to plant 25 trees for every tree that is cut down for the construction of the project. They also have to nurture the saplings for a period of five years, according to the guidelines. However, before the introduction of the new rules, developers needed to plant only twice the number of trees that are cut down.

GMR has refused to comply with the recently issued guidelines saying they go against the PDA, leading to delays in forest land clearance and subsequently financial closure. The company needs to complete the land acquisition before financial closure.

IBN signed the PDA with the Indian developer as the Nepal government has authorized it to act as the project implementing agency. As IBN has conceded that the provision inserted in the guidelines issued by the Forest Ministry conflicts with the PDA signed with the developer, it is planning to take a proposal to the Cabinet where the Indian developer will be allowed to acquire forest land as per the provision mentioned in the PDA.