Nepalese, Chinese companies ink joint venture agreement to build hydel project

KATHMANDU - Nepal Electricity Authority (NEA), the country's state-owned power utility body and China Three Gorges Corporation (CTGC) on Monday initialed the joint venture (JV) agreement to develop the 750-MW West Seti Hydropower Project in midwest Nepal.

Nepalese officials involved in the negotiation said they initialed the agreement subject to be endorsed from their respective board of directors. Once the boards of NEA and CTGC endorse the initial reached between the two sides, it will pave the way for signing JV agreement, said Maha Prasad Adhikari, chief executive officer of Investment Board Nepal (IBN), which facilitated the agreement between the two companies.

He described the development a "breakthrough" after the Nepali government and CWE Investment Corporation, a subsidiary company of CTGC signed a memorandum of understanding (MoU) in August 2012 to develop the project.

As per the MoU, the Chinese company will have a 75 percent stake in the reservoir type hydropower project with the NEA holding the rest.

The NEA, CTCG and IBN have been in tripartite negotiation since January 12, to pave the way for the development of Nepal's prioritized the project. As per the consensus reached, the Chinese company will provide up to 10 percent of its stake to the public, according to Semanta Dahal, a Nepalese lawyer advising both IBN and NEA during the negotiation.

Although the Chinese company has been involved in field works such as drilling and pre-feasibility survey of the project, the development of the project has remained uncertain in the absence of JV agreement between NEA and CTCG.

"Once JV agreement is signed, a JV company will be established in Nepal," said Dahal.

During the negotiation, the Chinese companies had raised concern over whether electricity to be produced by project would be consumed in Nepal and whether the transmission line will be ready by the time the project is completed.

"They were also concerned about the pricing of electricity generated by the reservoir type project which we addressed a few days ago by announcing the pricing," said a Nepalese official.