Nepal signs mega hydro project deal with Chinese firm

Kathmandu: Nepal has signed a major deal with a Chinese company to develop a 1,200 MW hydroelectric project, the biggest hydro project in the landlocked country that could resolve its perennial power crisis.

Nepal's Ministry of Energy yesterday signed an MoU with China Gezhouba Group Corporation (CGGC) for the development of teh much-touted 1,200 MW Budhigandaki Hydroelectric Project.

The agreement was signed at the prime minister's residence, in the presence of outgoing prime minister of Nepal Pushpa Kamal Dahal 'Prachanda' and Chinese Ambassador to Nepal Yu Hong, The Kathmandu Post reported.

As per the agreement, the storage project would be built under engineering, procurement, construction and finance (EPCF) model. Under this model, CGGC will help arrange funds required to develop the project.

The funds will be mobilised in the form of soft loan or commercial loan from Chinese financial institutions on terms and conditions acceptable to the Nepal government. CGGC will also undertake the overall responsibility of executing the project.

The Chinese developer, according to the MoU, will also conduct additional studies and investigations on the project if required.

The MoU has given one year's period to the Chinese developer to conduct assessment of the hydropower project and arrange necessary funds for its development.

This understanding, according to Energy Ministry officials, will not bind the government legally or financially to hand over the project to the Chinese company for construction, as the final agreement is yet to be signed.

The government has allocated a budget of Rs 5.33 billion for the project's development in the current fiscal year.

The EPCF model of project development, under which the contracting firm makes all the arrangements including mobilisation of financial resources to build the project, is considered to be one of the most effective and efficient models for development of huge infrastructure projects.

CGGC is currently building 30MW Chameliya Hydropower Project in the far west and 60MW Upper Trishuli 3A Hydropower Project in the central region.

The Budhigandaki Project has been touted as a key project to resolve the perennial power crisis in the country.

The government has been raising infrastructure tax of Rs 5 from sales of every litre of petrol, diesel and aviation fuel to collect funds to build the project.