Three Gorges to pull out of West Seti

• As if foreboding the latest development, the budget has envisioned developing West Seti project utilising local resources

Kathmandu, August 29

The two-day-long final round of talks between the government and a Chinese company — China Three Gorges International Corporation — ended today with the two sides failing to find a middle ground in implementing the West Seti hydropower project.

Signalling its intention to pull out of the mega project, the Chinese firm had put forth additional conditions despite the flexibility shown by the Nepali side, according to the Investment Board Nepal officials.

The IBN officials said details of the negotiations would be communicated to the IBN board, which is led by the prime minister, in the next board meeting of IBN and a necessary decision will be taken to break the long impasse in West Seti project, which is located in far western region of the country.

IBN had invited CTGI for final round of negotiations, as the board meeting held on July 17 had instructed the IBN to end the stalemate witnessed in implementation of West Seti project through decisive talks.

During the talks that began yesterday, however, the Chinese firm seemed reluctant to take the project
forward citing the low rate of return and said it would respect the decision of the next board meeting of IBN — hinting at its lack of seriousness in developing the project.

“Despite capacity optimisation and dollar-denominated power purchase agreement, the project is still financially unfeasible because of resettlement and other technical issues,” an IBN official quoted CTGI members as saying. As per CTGI, the return on equity of the project will hover around 12.5 per cent, and hydel projects can be considered feasible only when RoE is not less than 17 per cent, IBN officials said.

High-ranking officials of  IBN, Ministry of Energy, Water Resources and Irrigation, Ministry of Finance, Ministry of Law, Justice and Parliamentary Affairs and Nepal Electricity Authority had taken part in negotiations with CTGI, led by Zhao Jianqiang, its president. CTGI delegation also paid a courtesy call on the finance minister and energy minister after the meeting ended today.

IBN had shown flexibility in taking the project forward by agreeing to bring down the installed capacity of the project to around 600 megawatts from the initial agreement of 750 megawatts.

Exclusive preference was assured during the meeting from the Nepali side to provide dollar-denominated power purchase agreement for 12 years from the date of commissioning power, two years more than the norm.

IBN and CTGI had inked a memorandum of understanding to develop West Seti hydro electricity project in February 2012.

However, as if foreboding the latest development, the budget of the current fiscal has envisioned developing West Seti project utilising local resources if the Chinese company pulled out.