West Seti deal legal, transparent: Ministry

  • Says Electricity Act allows govt to okay such deals on mutual agreement


The Ministry of Energy (MoE) has said the memorandum of understanding (MoU) it signed with the China Three Gorges International Corporation (CTGI) for the West Seti hydroelectricity project is transparent and as per the country’s laws.

On Wednesday, the MoE replied to queries raised by the Parliamentary Natural Resources and Means Committee (NRMC). In a letter sent to the ministry, the panel had questioned the proposed modality of investment and equity sharing in the deal.

The ministry’s letter sent to the House panel said Clause 35 of the Electricity Act allows the government to hand over any project to a company on the basis of mutual agreement. It also said the project was previously handed over to Snowy Mountain Engineering Corporation (SMEC) through the similar procedure.

The MoE said it opted for direct negotiations as foreign developers would not be interested in international bidding that takes a long time.

“We have a bitter experience of the 600 MW Budhi Gandaki project, where attempts to find foreign developers through international bidding failed twice,” the letter said.

The ministry also admitted that two companies—China Machinery Engineering Corporation and Sinohydro Corporation Limited—had also approached the government for the West Seti project.

In the query as to why other companies were not considered, the MoE said that the two companies did not have experience of hydropower development. “There was no basis to hold talks with the companies that had no experience of hydropower development,” the letter said. “The MoU was, thus, signed with CTGI that has already developed a 22,500 MW storage project.”

On why it bypassed the Investment Board (IB) in going ahead with the CTGI, the MoE said the IB was still not operational when the Chinese company pitched for West Seti. It said negotiations with the CTGI was taken forward after discussions with Prime Minister Baburam Bhattarai.

“However, we have informed the board about the formation of a negotiations committee for the construction of West Seti under the public private partnership model,” the letter said.

On why the ministry did not seek free stake, free energy and additional royalty in West Seti as it had with Upper Karnali and Arun-3, the MoE clarified that the project was for domestic consumption and such demands would make the project costlier, eventually hitting consumers.

Though the MoE has not clarified on whether the power purchase agreement (PPA) with the CTGI would be done in dollars or Nepali currency, it has said it is aware of the losses the country incurred with the dollar PPA in the Khimti and Bhotekoshi projects. “The ministry is committed not to repeat the mistakes of Khimti and Bhotekoshi in the West Seti project,” the letter said.

The PPA will begin once the total cost of the project is finalised, the MoE said.

“As Nepal Electricity Authority (NEA) has 25 percent stake in the special purpose vehicle that would develop West Seti, the ministry is hopeful that the PPA rate would be fixed in the interest of the country through discussions between the MoE and the NEA,” the letter said.

‘Work after house panel probe ends’

Responding to a letter sent by the CTGI, the Ministry of Energy on Wednesday said work on the West Seti project will begin after investigations being carried out by the Natural Resources and Means Committee (NRMC) end. “We have asked the Chinese company to wait until the panel completes its probe,” a senior MoE official said. The ministry has sought continued support from the CTGI and has requested it not to deviate from the pact. The letter has been addressed to Wang Shaofeng, the vice-president of the company.

The CTGI had on March 16 asked the government to clarify its position following the NRMC’s directives against implementing the West Seti MoU. The company has even threatened to pull out of the 750 MW project.

Oppn mellows out


Leaders from the opposition parties—Nepali Congress and CPN (UML)—have said any obstruction in implementing a deal between the Ministry of Energy (MoE) and the China Three Gorges International (CTGI) to construct the West Seti hydropower plant would be needless if the government clarifies issues that they have raised.

Initially critical of the deal, leaders of the two parties now say the MoE must come up with satisfactory answers on the technical, legal and financial aspects of the agreement.

“We have no qualms about the West Seti project going ahead, but we want some unclear issues clarified. The construction can take place after a satisfactory response is had from the ministry,” NC leader Laxman Ghimire, who is also a member of a probe team formed by the Parliament’s Natural Resources and Means Committee, said.

The probe team has said the project will go ahead if it gets a good response to all the 16 questions about the deal it has asked.

The MoE on Wednesday replied to the House panel. “We will take a call after discussing the MoE’s response,” said NC leader Gagan Thapa, another member of the probe team.

Thapa said his team had three major concerns about the deal. The first, he said, was that the deal should follow the due legal processes so that it does not set a bad precedent.

Second, the government must make sure that the PPA for the project is not done on the basis of dollars and that it is developed as a multipurpose project that includes irrigation componenets.

The third, the government must make sure that the deal allots at least 10 percent of the project share to the people of the Far West and comes up with a clear plan to compensate people who will be displaced by the project.

UML leaders have taken a similar stance on the project. They said it must be developed without delay after ensuring that it is in the national interests.

UML leaders, who had faced severe criticism for their strong opposition to the Arun-III Hydroelectricity project in 1994, are now in favour of timely implementation of the West seti deal.

The UML leaders said the party has realised that it must not let the case of Arun-III happen again and not be blamed further for any delay in the construction of development projects in the country.

Some leaders, including Chairman Jhala Nath Khanal and former Finance Minister Surendra Pandey, are  stressing on construction of the project to address the ever increasing

energy crisis.

“The UML is in favour of national interests and the project should be constructed,” Pandey said.

Posted on: 2012-03-22 08:43