Thursday, June 14, 2012

Nepal ready to attract $6 billion investment with new PDA template

The Investment Board directors' meeting today approved the new Project Development Agreement (PDA) template for hydropower projects above 500MW that will ensure $6 billion investments.
The agreement – drafted by one of the world’s leading legal firms – ensures balanced and bankable deals that fully benefit and protect Nepal’s interests. The caretaker Prime Minister Baburam Bhattarai, who chaired the board, expressed optimism at the accomplishment of the joint efforts of the Investment Board, the Ministry of Energy and related agencies to develop the PDA template, which will now provide a much needed impetus to enable negotiations on currently four priority projects, that will produce 3000 MW of electricity.
"Harnessing Nepal’s hydro resources for Nepal’s socio-economic transformation has always been my number one economic priority," Bhattarai said, adding that the new PDA template will now equip Nepal with the capability to negotiate good hydropower deals and ensure maximum benefits in terms of revenue, spending, industrial and employment benefits, and electricity.
“I would like to also assure investors that work on their projects will go unhindered," he added, asking the investors to investors. "Nepal is open for business and the current political uncertainty will not affect Nepal’s economic activities.
Due to lack of power — the engine for economic growth — the country is witnessing huge unemployment.
The new PDA template comes as a response to the previous model PDA that was rejected by developers and financiers in 2010 for not being bankable, according to chief executive of the board Radhesh Pant.
"The new template protects the interests of both the people and developers, investors," he said, adding that it will also ensure fair return for investors to enable them to get financing at competitive costs, timely approval mechanism, provide for due diligence oversight to ensure commitments are met.
It has also included best practices of international environmental and social standards, will ensure model community benefits package and fair resettlement and rehabilitation though its only an agreement template. But the individual agreements will also be negotiated and tailored to project circumstances and economics, local community needs and aspirations, he added.
The new template will currently be applicable to the four hydro mega projects — Tamakoshi III (650MW), Upper Karnali (900MW), Upper Marsyangdi (600MW), and Arun III (900MW).
"With the approval of the PDA template, we are now on a fast track to move on project agreements that will unlock the country's vast hydro potential and solve the load shedding problem,” Pant said, adding that the board would present the PDA template to key developers in the next few days to enable both sides to lay the groundwork for intensive negotiations.
He also assured the developers that the board will be approaching the negotiations in a constructive and cooperative manner.
"We have the opportunity to bring in $6 billion in foreign direct investment (FDI), create new opportunities for Nepali businesses and the labour force," the chief executive said, adding that it not only solves the load shedding problem, but also address the country's biggest obstacle to investment, business development and economic growth.
The Investment Board, as a leading agency representing the government, was set up in November 2011 as a one window solution for foreign investors and developers investing in hydro projects above 500MW and other infrastructure projects above Rs 10 billion to fast track projects and cut through bureaucratic obstacles and delays.

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