Investment Board to fast track PDA negotiations with hydro developers

The Investment Board will fast track formal negotiations on the Project Development Agreement (PDA) with three mega hydropower developers covering four projects.

After a meeting of the directors of Investment Board, chaired by caretaker prime minister Dr Baburam Bhattarai, today, in Kathmandu, the board has decided to fast track formal negotiations on each of the four hydropower projects — SN Power’s Tamakoshi 3 (650MW), SJVN’s Arun III (900MW), and GMR’s Upper Karnali (900MW) and Upper Marsyangdi 2 (600MW).

The companies had reviewed a draft of the PDA template and commented on it in December.

"The comments have been taken into account by the Investment Board and it will engage in finalising the project specific PDAs," said Bhattarai, in the meeting.

"The number one economic priority of the government has always been to harness hydro resources for the country's economic transformation," he said, adding that the country now will move forward with negotiations. "We will conclude deals that ensure maximum benefits in terms of government revenue, local benefits for communities, maximising hydro spin offs for domestic industries and services sector, thousands of jobs for Nepalis, and solve our load shedding problem," he added.

The Investment Board will use the PDA template as the basis for negotiations and tailor it to suit each of the four projects.

With an installed capacity of a total 3,050MW, the four projects aimed at the Indian market will first satisfy domestic power needs. Of the four projects, Arun III has committed to provide Nepal with 21.9 per cent free electricity while Upper Karnali has committed 12 per cent free electricity and 27 per cent free equity, in addition to paying royalties and taxes.

"The PDA template reflects several changes following a detailed feedback from developers and the international lender community," informed chief executive of the board Radhesh Pant.

"In addition to a team of world class commercial, technical and legal experts, the board will be working very closely with the Ministry of Energy and Nepal Electricity Authority to bring this PDA to fruition," he said, adding that with the board’s endorsement of the negotiating mandate, the PDA Negotiation Team will begin project specific negotiations with the developers immediately under the guidance of a PDA Coordination Committee chaired by the vice chair of National Planning Commission Deependra Bahadur Kshetry.

The PDA Negotiation Team will be advised by relevant national and international legal, technical and commercial experts, said Pant, adding that an international team of experts has been appointed to provide input to the Investment Board in its assessment. "Negotiations on large-scale projects like these generally take several months to close."

Pant informed that the board has been conducting thorough financial analysis to assess economic benefits that would accrue to Nepal from the investment necessary to implement these hydro projects, each of which costs more than $1 billion (around Rs 85 billion).

"We have just appointed a leading engineering firm Lahmeyer International with assistance from World Bank through an open competitive process to review the four projects," he informed. "Their findings as well as our financial analyses will help inform Nepal’s negotiating position."

"The board will sign deals that are balanced with terms that protect and benefit all parties," Pant shared.

The technical analysis will also ensure that these power projects are safe and sustainable.

In addition to PDA negotiations, the board made decisions on other large infrastructure projects and gave the Office of the Investment Board the approval to move ahead with a Detailed Project Report (DPR) of the Kathmandu Valley Metro Rail project, mandated the Office of the Investment Board to form a six-member verification team to move forward with the Kathmandu Valley Solid Waste Management project, and decided to conduct a feasibility study for a chemical fertiliser plant. 

Nigerian wants to establish cement factory

KATHMANDU: The Investment Board has also decided to form a committee led by the Office of the Investment Board and consisting of director generals of the Department of Industry and Department of Mines and Minerals to evaluate a proposal received by the board from a Nigerian investor interested in establishing a cement factory in the country.