IBN for materialising West Seti agreement

IBN for materialising West Seti agreement

  • PM’s visit to China


Mar 11, 2016- The Investment Board of Nepal (IBN) has called on the concerned authorities, including the Prime Minister’s Office (PMO), to materialise a Joint Venture (JV) agreement between the Nepal Electricity Authority (NEA) and China’s CWE Investment Corporation for developing the 750MW West Seti Hydropower Project during Prime Minister KP Sharma Oli’s visit to China beginning March 20.

The IBN on Sunday forwarded a letter to the PMO, the Ministry of Foreign Affairs (MoFA), the Ministry of Energy (MoE) and the NEA, asking if the JV agreement is possible during PM Oli’s China visit. “We have asked all the stakeholders to speed up the process so that the agreement could be signed during PM Oli’s visit to China,” said IBN CEO Radhes Pant.    

Despite getting the draft JV agreement some nine months ago from the CWE, the IBN is struggling to get the deal done. As per a memorandum of understanding (MoU) signed between the IBN and the Chinese company in August 2012, the latter will hold a 75 percent stake in the joint-venture company, with the NEA holding rest of the stakes. Even after almost four years of signing the MoU, the JV agreement for West Seti is still to materialise, primarily due to reservations from the NEA side. NEA officials said they have gone through the draft they have received from China’s CWE and that they have made some amendments to it. The amended draft is now in the final stage, according to the NEA. “We are about to present it to the board,” said Mukesh Kafle, managing director of the NEA. “After the board approves the draft, it will be again sent to the CWE Investment Corporation for their approval.”  If everything goes as planned and the agreement materialises, it would be a major breakthrough for the West Seti Project.  However, some NEA officials have expressed doubt that such an agreement will be reached soon.

“This agreement is about creating another company to develop a project,” said an official at the NEA. “Therefore, unless officials from both the companies sit together, it is very unlikely that such an agreement will materialise.” In addition, the NEA is still not clear about how it will invest in the project, as the financial health of the authority is weak and it lacks resources. The project is estimated to cost $1.6 billion.

The Finance Ministry in April 2014 had written to the Chinese government seeking $400 million in soft loans to invest as an equity partner and to build a transmission line to evacuate power. But no headway has been made so far.

The NEA said it did not have the guidelines to sign power purchase agreement with a storage-type project. Almost all of Nepal’s hydropower projects are run-of-the-river type.

Fuel  deal to be high on agenda

A deal on importing fuel will be high on Prime Minister KP Sharma Oli’s agenda during his state visit to China beginning March 20. The Nepali side is preparing to sign a long-term commercial agreement to import petroleum products from the northern neighbour.
Based on a Memorandum of Understanding (MoU) signed in Beijing during Deputy Prime Minister and Minister for Foreign Affairs Kamal Thapa’s visit to China in October last year, both the countries are preparing to sign a formal deal to import fuel from the northern neighbour. The MoU signed in October stipulates that Nepal will import up to 30 percent of its petroleum needs from China.