Nepal signs 1.4 bln USD hydropower project agreement with Indian investor
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E-mail Xinhua, September 19, 2014
The Nepalese government Friday signed an agreement with an Indian hydropower developer, making ways for the latter to initiate a 1.4-billion-U.S. dollar hydropower project in the Himalayan country.
Radhes Pant, chief executive officer of Nepal Investment Board (IBN) and R.B Seson, president of energy wing under GMR Energy of India signed the power development agreement (PDA) at a function here.
The date for the signing of the PDA was fixed only on Thursday after Nepalese Council of Ministers endorsed the draft along with authorizing the IBN to go ahead with the sealing of the pact.
The IBN is an agency formed by the government to facilitate and expedite mega projects such as hydropower projects with more than 500 MW capacity.
With the signing of the PDA, the government has opened up avenues for the Indian infrastructure giant to initiate development of the 900 MW Upper Karnali Hydropower Project.
The PDA is an important pact the government has signed so far with any foreign investors and the government has assured the investors that it would avert any possible social, economic or policy-level uncertainties during the project implementation.
Issues related to taxes, licence period, free energy, royalty, repatriation rights and parties' obligations are included in the PDA.
Nepal's Prime Minister Sushil Koirala, Deputy Prime Minister Bam Dev Gautam, Indian Home Minister Raj Nath Singh and Indian Ambassador to Nepal Ranjit Rae, among others were present during the PDA signing.
The signing of the agreement has been seen as a major breakthrough as it sets the tone for more foreign investment in the country's hydropower sector.
Two more foreign developers, Satluj Jal Vidyut Nigam and Statkraft, are in line to sign similar agreements with the government.
Satluj and Statkraft have been planning to develop 900 MW Arun III and 880 MW Tamakoshi III hydro projects respectively under the direct foreign investment.
The IBN will use the same template when it signs agreements with these developers, which will open up opportunities to bring in more than 8 billion U.S. dollars in direct foreign investment in Nepal.
The IBN initiated the PDA negotiation with the GMR more than a year ago after it developed first PDA template in June, 2012.
However, following disputes on several issues including tax exemption, resettlement of the project affected population, access to free energy and construction of transmission lines along with disruptions created, a number of political parties had hindered the government to sign the agreement with the GMR.
As per the agreement, the developer will have to initiate the project construction within two years; otherwise the project licence will be automatically terminated. The developer will give 12 percent of the total power generated by the project free of charge and 27 percent of the free equity in the project to the government.
Moreover, the project will be completely handed over to the Nepalese government after 25 years of operation by the developer, according to the press statement issued by the IBN.
Speaking on the occasion, Nepal's Deputy Prime Minister Gautam said the signing will ensure the socio-economic development of the country.
"This has also given a glimmer of hope to other foreign investors to come and invest in Nepal," he added.
Similarly, Indian Home Minister Singh said the agreement was signed as per the policy of Indian Prime Minister that the development of India alone would not suffice until the whole South Asia region develops.
Once constructed, it will be the first ever export-oriented project constructed in Nepal which has been seeking to sell its additional hydro energy to neighbouring markets for more than a decade. Endi
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