India to promote sub-regional energy hub

 India is planning to promote a sub-regional energy hub.

"The sub regional energy hub comprising of Bhutan, Bangladesh, Nepal, Myanmar and India will help meet its energy needs," according to foreign secretary of India Harsh Vardhan Shringla, delivering his remarks during the inauguration of the South Asia Group on Energy at the Research and Information System for Developing Countries in New Delhi today.

India is taking the lead to promote a regional approach to meet its energy needs, the Indian foreign secretary said, adding that it is natural for India to be the epicentre for any energy initiative in the region as it is the largest producer and consumer of energy in the region. "We have to make energy affordable, accessible and clean," he said, adding that India is promoting easier movement of hydrocarbons across the region.

Shringla, on the occasion, also mentioned that the the first South Asian cross-border petroleum products pipeline from Motihari in India to Amlekhgunj in Nepal was remotely inaugurated by Indian and Nepali prime ministers in September 2019. "The pipeline has helped save Indian Rs 1 billion for Nepal Oil Corporation."

India is now expanding the project to Chitwan, and also construct a new pipeline connecting Silguri and Jhapa in Nepal," he added.

Likewise, India supplied some 700 MW of power to Nepal in 2019 through more than 25 transmission interconnections, Shringla informed, hoping that Nepal may also start exporting power in the near future. "The first high capacity cross-border power transmission line, from Dhalkebar in Nepal to Muzaffarpur in India has been completed with Government of India-assistance and was upgraded to 400 KV capacity in November 2020."

"More cross-border high-capacity connections are envisaged," he added.

In the power generation sector, Satluj Jal Vidyut Nigam Ltd (SJVNL) is developing the 900 MW Arun-III hydroelectric project in northeast Nepal, the Indian foreign secretary said, recalling the Lower Arun project of Nepal has recently been awarded to SJVNL. "A consortium led by GMR is developing the 900 MW Upper Karnali hydroelectric project in western Nepal." 

Upper Karnali is an export-oriented project, where power is to be supplied to India and Bangladesh. "Private sector participation in the hydropower sector holds enormous promise," he said, mentioning that there is a wide variation in energy resource endowments and energy demand in the region. "While India and Bangladesh account for the major natural gas and coal resources, Bhutan and Nepal have large hydropower resources, and Sri Lanka has great potential for solar and wind power production."

All the South Asian countries, in fact, have vast renewable energy potential. "By harnessing complementarities in electricity demand, load curves and resource endowments, a mutually beneficial model of cooperation in South Asia could be developed," he said.

Nepal-India nears final modality on power trade

 Nepal and India today discussed development of suitable rules and guidelines for allowing access to Nepali power producers to Indian markets.

The eighth meeting – through video conferencing – of Joint Steering Committee (JSC) on Cooperation in Power sector today co-chaired by the power and energy secretaries of India and Nepal today discussed, inter alia, development of suitable rules and guidelines for allowing access to Nepali power producers to Indian markets, development of energy banking mechanism, development of cross border high voltage transmission lines as well as reviewing the progress of the SJVN Ltd- developed 900MW Arun-III Hydro Electric Project in Nepal and agreeing to further facilitate its expeditious implementation.

Both governments have been coordinating closely with each other in this sector, according to a press note issued by the Indian Embassy in Kathmandu.

Consequently, progress made in the last five years in this sector has been exemplary, it reads, adding that it includes completion of South Asia’s first cross border 400 KV transmission line at Muzaffarpur-Dhalkebar, agreement on funding modality for Gorakhpur-Butwal 400 KV line for which the construction will commence soon, and the brisk progress on the 900 MW Arun-III Hydro Electric Project. “Both sides are also close to finalising the regulatory modality for allowing Nepali power producers access to Indian power market which will provide an outlet for Nepal’s surplus power in the coming months.”

The meeting was led by energy secretary Dinesh Kumar Ghimire, who was assisted by representatives of various ministries and departments, while his counterpart Indian power secretary Sanjiv Nandan Sahai led the Indian team that included by ambassador of India to Nepal Vinay Mohan Kwatra and a 17-member delegation drawn from various ministries and public sector undertakings of Indian government including NHPC Ltd, NTPC Ltd and the Indian Embassy in Kathmandu.

The Joint Working Group (JWG) meeting at the level of joint secretaries was held yesterday in preparation of this meeting.

The JSC is the apex bilateral mechanism for enhancing and coordinating various government-to-government led initiatives in power sector. The meeting reviewed progress made on bilateral processes and initiatives in this sector. “Both sides reaffirmed their commitment to further strengthening the power sector cooperation between the two countries, including development of an integrated grid, building of more cross border transmission lines, as required, as well as investing in Nepal’s hydro and solar power projects,” the press note reads, adding that the positive and wide-ranging discussions are expected to further support the expansion in power sector cooperation between India and Nepal.

Investment board completes pre-qualification assessment of Rs 1.18 trillion worth projects

The Investment Board Nepal (IBN) claimed that it has completed the pre-qualification process of 14 projects worth Rs 1.18 trillion, out of the 50 projects that the investors showed interest during the Investment Summit 2019 held last March.
The board has already selected the company to conduct detailed feasibility study (DFS) of 756-megawatt (MW) Tamor Hydropower Project, IBN’s chief executive officer Maha Prasad Adhikari informed at a press meet orgainsed by the board today.
Likewise, the board has signed the initial investment agreement with Korean company Motrex to set up a vehicle manufacturing and assembly plant project worth Rs 10.54 billion, he said, adding that of the 77 projects that the government had showcased at the Nepal Investment Summit held in March, investors had submitted expression of interest (EoI) for 31 different projects amounting to more than $25.3 billion. “The board is continuously signing agreements with investors, who had expressed their interest in projects showcased at the investment summit.”
The board has also signed an agreement with a foreign firm to develop the Rs 64.6 billion worth Nepal-China Friendship Park Project in Province 1. “Similarly, the board has inked an agreement with two separate companies to conduct the DFS for developing the Rs 13 billion worth Multi-Model Logistic Parks in Biratnagar, Birgunj and Bhairahawa,” he said, adding that the board – as of today – is in the phase of implementing nine different projects worth Rs 565 billion. “Of this, development of Arun-III hydroelectric project is ongoing, while Hongshi Cement will soon start the second phase of production.”
These projects also include Kathmandu Outer Ring Road Project with a proposed cost of $1.87 billion, Lower Arun Hydro Power Project ($1.3 billion) and Nijgadh International Airport ($3.45 billion). Likewise, the applications for remaining 16 projects were not qualified during the evaluation process. “Similarly, the screening report has been prepared for Kathmandu Sky Train Project ($310 million) and Integrated National Agriculture Infrastructure ($70 million).”
Out of the total applications, the board disqualified 16 proposals and 20 did not receive any applications,” he said, adding that those projects which did not draw any eligible applicants will be still in the 'project list' of the board.
Adhikari, on the occasion, also sought government’s support in addressing few difficult legal processes that has been creating hassles in approving projects in a timely manner.

Arun-III to ink financial closure

The SJVN Arun-III Power Development Company is soon signing financial closure.
The company has almost finalised the necessary documents for the financial closure, residential representative of SJVN Arun-III Power Development Company Hareram Subedi said, adding that the company has already forwarded the necessary documents to Investment Board Nepal (IBN) for its final approval. “After it gives a green signal, the company will ink the financial closure with IBN by February,”
SJVN – a subsidiary company of Satluj Jal Vidyut Nigam Ltd of India, which has been tasked with building the project – has however, completed around 30 per cent of construction work of 900-megawatt (MW) Arun-III hydroelectric project.
 Investment Board Nepal is meanwhile discussing with the central bank before granting approval. “
Arun-III – an export-based project, which will bring the largest-ever government-to-government level foreign direct investment (FDI) from India worth $1.2 billion – has signed investment pledge with Everest Bank (Rs 10.5 billion) and Nabil Bank (Rs 5 billion).
The SJVN Arun-III Power Development Company said that they have accelerated the civil, hydromechanical and electromechanical works simultaneously. It has awarded civil works to an Indian firm called JP Construction, which has already started executing the construction work.
The board and SJVN had signed an agreement in November 2014 for the power development agreement of Arun-III hydropower project that is supposed to start generating energy by 2020 according to earlier agreement. But the board and SJVN reached an agreement later to complete the construction of the project by 2023.
Nepal will get Rs 330 billion as royalty in a period of 20 years and the project will also provide 21.9 per cent of the generated energy free of cost, apart from shares to locals and free energy to the affected areas. The project will generate 400 million units of power every year.

India proposes to construct Lower Arun Hydro Project

India has again proposed to construct 400-megawatt (MW) Lower Arun Hydropower Project in Sankhuwasabha district.
The government of India has again expressed interest to construct the Lower Arun Hydropower Project in a meeting with minister for Energy, Water Resources and Irrigation Barshaman Pun in the Capital today. Indian Minister of State for Power RK Singh has proposed that the new project can be developed adopting the same model of 900-MW Arun III Project, according to a press note issued by the ministry. “The Indian government had earlier proposed to build the project when minister Pun had visited India in February.”
Singh mentioned that India has proposed to build Lower Arun as per all conditions set in Arun III. According to the agreement on Arun III, the government – apart from shares being allocated to the locals and free energy to the affected areas – will get Rs 330 billion as royalty over a period of 20 years and the project will also provide 21.9 per cent of the generated energy free of cost to Nepal. “The developer will hand over the ownership of the project to Nepal after 20 years of commercial operation.”
According to the Energy Ministry, New Delhi has also submitted a proposal to develop Lower Arun. “Nepal has said that further discussions on Lower Arun will be based on the work progress of Arun III,” the officials said, adding that construction work of 900-MW Arun III hydropower project has been completed some 25 per cent till date.
The energy minister had previously scrapped the licence granted to a Brazilian company ‘Brass Power’ for construction of Lower Arun Project according to the directive from the Commission for the Investigation of Abuse of Authority (CIAA). The company had failed to make any progress in the project in the 15 years duration after the licence was awarded to it.
The project cost for Lower Arun is estimated at over Rs 100 billion. But according to the initial study conducted by Brass Power, the installed capacity of the project can be enhanced to around 1,000 MW, if it is developed as a storage-type project. “But the Department of Electricity Development is carrying out the feasibility and detailed study of the project at present.”

Korean company to set up assembly plant in Nepal

Investment Board of Nepal (IBN) today approved foreign investment of Rs 10.54 billion for a South Korean company Motrex Co Ltd.
The 35th meeting of the IBN chaired by Prime Minister KP Sharma Oli has approved the investment for the Vehicle Manufacturing and Assembly Plant proposed by Motrex Cp Ltd, according to a press note from the board.
The South Korean company is engaged mainly in the manufacturing and distribution of automotive parts. The company’s products include audio-visual navigation (AVN), audio video (AV), around view monitor, head up display and rear seat entertainment (RSE).
According to the board, the South Korean company is planning to assemble four-wheelers in Nepal.
Likewise, the meeting also decided to extend the term of the SJVN Arun-III Power Development Company Pvt Ltd – the developer of Arun-III hydropower – till July 30 for its financial closure.
According to the board, SJVN Arun-III Power Development Company Pvt Ltd (SAPDC) – a fully-owned subsidiary of the Indian government’s Satluj Jal Vidyut Nigam Limited (SJVNL) – will now have to complete financial closure for the 900-MW hydro-power project by June 30. Earlier in November 2017, the board had decided to extend the deadline by six months, to arrange funds. The project has recently received the transmission license. It has already taken forward its construction work which has helped the board to decide to extend the deadline for the financial closure of the Indian company.

Almost half of Arun III-affected buy land with compensation

Almost half of the Arun III hydropower project-affected locals bought land from the compensation money they received from the project developer.
"Some 46 per cent of locals affected by the 900-megawatt SJVN Arun III Hydropower Development Project have purchased land with the compensation money that they received for their land that was acquired by the project," according to a study report.
The study 'Use of cash survey (Arun III) Hydropower Project’ conducted by the Investment Board Nepal (IBN) reveals that around half the affected people had used the compensation to purchase fixed assets like land and houses. The board has said that the main purpose of the study was to confirm how the affected people had utilised the cash compensation that they had received. "Most of the affected people have procured their new property close to their original dwellings," the report reads, adding that only a small number of families have purchased agricultural land. "Only 15 per cent of the project affected families who were previously engaged in agriculture were interested to continue with their profession after receiving the compensation."
According to the project that is located in Sankhuwasabha district, the locals were provided Rs 8.25 lakh per ropani as compensation for uncultivated land and Rs 9.07 lakh per ropani for cultivated land. Likewise, compensation of Rs 1.43 million per ropani was fixed for cardamom fields and Rs 1.2 million per ropani for land with crops. The project has already paid land compensation worth Rs 1.30 billion and will spend around Rs 2 billion for land acquisition process. According to the project, it still needs to acquire 33 hectares of land. It has already provided compensation for 50 hectares of land in the affected district.
Among those who bought fixed assets, some 49 per cent have bought or constructed houses, it adds. "After fixed assets, they have used their compensation money in services like education and health as the most preferred area of investment as 17 per cent used the compensation in education and health services."
But some 15 per cent of the affected households used the compensation in repaying family loans, while almost 11 per cent used it in unspecified areas, the study report reveals, adding that just five per cent of the families used the compensation in businesses.
The government will also get Rs 330 billion as royalty for a period of 20 years – from the hydropower project – apart from distributing shares to the locals and free energy to the affected area. The Arun III hydropower project – an export-based hydropower project – that will generate 400 million units of power every year will also provide 21.9 per cent of energy free of cost. Arun-III will bring the largest ever foreign direct investment (FDI) from India worth Rs 102 billion.

Sutlej offers to sell 10 per cent power to Nepal

The Indian power developer Sutlej is proprosing to sell 10 per cent of the energy – available for export from mush-awaited Arun III Hydropower Project – to Nepal.
SJVN Arun III Power Development Company wrote – last week – to Investment Board Nepal (IBN) asking if the Nepal government would be willing to buy 10 per cent of the total energy available for export.
According to the project development agreement (PDA) signed between SJVN and the board, Nepal will receive 21.9 per cent of the total energy generated by the project free of cost while the developer has rights over the rest of the output. The agreement also requires the developer to offer 10 per cent of the electricity from its share to Nepal on commercial terms.
"As we have secured a market for 90 per cent of our share of the energy, we have sent a proposal to board asking if the Nepal government would be interested in buying the rest of the electricity as provisioned in the PDA,” said resident representative of SJVN in Nepal Hari Ram Subedi.
The board has forwarded Sutlej proposal to Nepal Electricity Authority (NEA), the sole buyer of electricity in the country.
The NEA – confirming that the government power utility has received the proposal – said that it will ask Sutlej to clearly mention the terms and conditions and the tariff rate. "If Sutlej quotes a reasonable rate, the NEA will purchase the electricity from Arun III," informed the NEA.
The Indian developer of the export-oriented 900 MW plant located in eastern Nepal is carrying out work on the construction site of the Arun III plant on a war footing after Nepali and Indian Prime Ministers jointly laid the foundation stone for the project remotely this May during Indian Prime Minister Narendra Modi’s Nepal visit.
According to the board, Nepal will receive Rs 348 billion over 25 years from the project. The project developer will also provide 21.9 per cent of the energy free of cost, which is worth Rs 155 billion, plus another Rs 107 billion in royalties.

Oli, Modi flag off Janakpur-Ayodhya direct bus service

Prime Minister KP Sharma Oli and visiting Indian Prime Minister Narendra Modi today flagged off the direct bus service from Janakpur to Ayodhya.
The direct bus service – announced by Modi while he visited Nepal in 2014 – comes under the 'Ramayan Circuit', that they both jointly announced from the premises of the Janaki Temple in Janakpur. The 'Ramayan Circuit' and direct bus service is expected to help promote the religious tourism between the two neighbours.
The Ramayana Circuit is one among the 13 tourist circuits under the Indian government promoted Swadesh Darshan scheme. Indian Ministry of Tourism has linked 15 destinations – from where Lord Ram is believed to have travelled – in the Ramayana Circuit.
Modi – during the two-day State visit – has landed in Janakpur on Air India aircraft.
Today evening Oli and Modi will jointly inaugurate an Indian-financed Arun III hydropower project.
5T key in Nepal-India relation
Modi, while addressing the crowd in the Barhabigha maidan in Janakpur, also said that 5T – Tradition, Trade, Tourism, technology and Transport – has important role in the relation between Nepal and India. Though, he talked about connectivity, he didnot mention increasing air connectivity, which Nepal has been asking for long. He also announced Rs 1 billion for the development of Janakpur and surrounding areas. "The aid will be spent in the coordination between the centre government and province," he said, referring Kathmandu and Janakpur, the capital of province 2.

अरुण तेस्रोमा लगानी जुट्यो

भारत सरकारले एसजेभिएन (सतलज) लिमिटेडलाई बजेट विनियोजन गरिदिएपछि दुई दशकअघि राजनीतिक कारणले रोकिएको अरुण तेस्रो जलविद्युत् आयोजना बन्ने भएको छ।
नयाँदिल्लीमा प्रधानमन्त्री नरेन्› मोदीको अध्यक्षतामा बुधबार बसेको मन्त्रिपरिषद् अन्तर्गतको अर्थ समिति बैठकले ५७ अर्ब २३ करोड भारतीय रुपैयाँ (नेपाली रुपैयाँ ९१ अर्ब ५७ करोड ९५ लाख ) सतलजलाई विनियोजन गरिदिएपछि नौ सय मेगावाटको बहुप्रतिक्षित परियोजनाका लागि वित्तीय स्रोत व्यवस्था भएको हो।
भारतीय सञ्चारमाध्यमका अनुसार बैठक निर्णयबारे जानकारी दिँदै ऊर्जामन्त्री पियुष गोयलले आगामी पाँच वर्षभित्र सो परियोजना निर्माण गरिसक्ने बताएका छन्।
अरुण तेस्रोलाई भारतको केन्› सरकार र हिमाञ्चल प्रदेश सरकारको साझेदारीमा खोलिएको एसजेभिएनले (सतलज विद्युत् निगम) निर्माण गर्न लागेको हो। एसजेभिएनले नेपालमा अरुण तेस्रो जलविद्युत् आयोजना निर्माण गर्न आफ्नो शतप्रतिशत लगानीको सहायक कम्पनी एसजेभिएन–अरुण तेस्रो कम्पनी दर्ता गरिसकेको छ।
परियोजनाको सर्भे लाइसेन्स ९ वर्षअघि पाएको एसजेभिएनले ४ वर्ष लगाएर अनुसन्धान काम सकेको थियो। त्यसपछि ३ वर्षअघि डिपिआर समेत तयार पारिसकेको यस आयोजनाले हालसम्म करिब १ अर्ब २९ करोड रुपैयाँ मुआब्जा पनि बाँडिसकेको छ। आयोजनाले २ सय ६५ परिवारको घर तथा जग्गा अधिग्रहण गर्ने तयारी गरेको छ।
२०७१ मंसिर ९ गते लगानी बोर्डसँग सतलजले आयोजना विकास सम्झौता (पिडिए) सम्पन्न गरी दुई वर्षपछि निर्माण कार्य सुरु गर्ने सहमति भएको थियो। अरुण तेस्रो जलविद्युत् आयोजना निर्माणमा करिब एक हजार रोपनी जग्गा अधिग्रहण गर्नुपर्ने हुन्छ। सम्झौता अनुसार आयोजनाले प्रभावित परिवारलाई ३० युनिटका दरले विद्युत् निःशुल्क उपलब्ध गराउनेछ। यो घरजग्गा अथवा दुवै प्रभावित परिवारले पाउने छन्।
पिडिएमा सरकारले एक वर्षमा निजी जग्गा र २१ महिनामा सरकारी जग्गा उपलब्ध गराउने प्रतिबद्धता व्यक्त गरेको थियो। यो आयोजना बिजुली उत्पादन सुरु भएको २५ वर्षपछि सतलजले नेापाल सरकारलाई हस्तान्तरण गर्ने सम्झौता छ।
प्रतिमेगावाट लागत १० करोड ५७ लाख रुपैयाँ हुने अनुमान गरिएको यस परियोजनाको  'फाइनान्सियल क्लोजर' आउँदो असोजसम्म गर्नुपर्ने थियो। तर, बुधबार भारत सरकारले यस परियोजना र लगानी पारित गरेपछि अब अरुण तेस्रो परियोजनाको निर्माणले गति लिने एसजेभिएन लिमिटेडका अध्यक्ष तथा म्यानेजिङ डाइरेक्टर आर एन मिश्राले पिटिआईलाई जानकारी दिएको भारतीय सञ्चार माध्यमले जनाएका छन्।
सम्झौता अनुसार अरुण तेस्रोले अबको ५ वर्षमा उत्पादन सुरु गर्नुपर्ने छ। आयोजनाले पहिलो कामअनुसार पाथीभराको छिरिन्टेमा २० मिटर अग्लो बाँध बाँधी चार सय ६६ मिटर लामो टनेल बनाएर पानी फर्काउन हाइटेन्सन टनेल निर्माण गर्ने र फ्याक्सिन्दामा पानी खसाल्ने बताएको छ। दोस्रो कामका रूपमा ड्याम र सुरुङ निर्माण गरिने आयोजनाले जनाएको छ।
संखुवासभा जिल्लामा पर्ने अरुण तेस्रो जलविद्युत् आयोजनाको कुल अनुमानित लागत एक खर्ब ४ अर्ब रुपैंयाँ रहेको छ।
सम्झौता अनुसार अरुण तेस्रो जलविद्युत आयोजनाबाट उत्पादित कुल विद्युत्को २१ दशमलब ९ प्रतिशत अर्थात् १९७.१ मेगावाट बिजुली नेपाललाई निःशुल्क उपलब्ध गराउनुपर्ने छ।
आयोजनाबाट २५ वर्षमा नेपाललाई ३ खर्ब ४८ अर्ब  रुपैयाँ प्राप्त हुनेछ। त्यस्तै एक अर्ब १६ अर्ब रुपैयाँ रोयल्टी, एक खर्ब ६६ अर्बको निःशुल्क विद्युतु र ८० अर्ब आयकर नेपालले पाउने बताइएको छ।
कम्पनीले व्यावसायिक उत्पादन सुरु भएपछि १० वर्षसम्म शतप्रतिशत नै आयकर छुट पाउनेछ। त्यसपछिको थप पाँच वर्ष नेपाल सरकारले ५० प्रतिशत आयकर छुट दिनुपर्ने छ।
आयोजनाका लागि आयात गरिने सिमेन्ट, रड तथा स्टिलजन्य सामग्री खरिद गर्दा भन्सारमा ५० प्रतिशत छुट दिइने व्यवस्था पनि सम्झौतामा छ। यस्तै, परियोजना सम्पन्न भएपछि नेपालले पाउने निःशुल्क ऊर्जाबाहेक अरुण तेस्रो र माथिल्ला कर्णालीको विद्युत् भारतमा निर्यात हुनेछ।

Chinese company to develop 750-MW West Seti

A meeting of Investment Board Nepal chaired by Prime Minister Sushil Koirala today approved investment from a Chinese company to develop the 750-megawatt West Seti Hydropower Project.
The project that is estimated to cost Rs 160 billion will now be developed by a joint venture with Nepal Electricity Authority (NEA) and CWE Investment Corporation, a subsidiary of China’s Three Gorges Corporation (TGC). The state power utility, NEA will have 25 per cent in equity, and CWEI will inject investment for the equity and borrow the remaining amount.
The joint venture will conduct geological tests before monsoon for the mega hydropower
project that is going to be constructed in Baitadi, Bajura, Dadeldhura and Doti districts of Far Wester Region, according to the chief executive officer of the Board Radhesh Pant.
Soon after completion of geological and hydrological tests, we will begin negotiations on Project Development Agreement (PDA) with the Chinese company,” he said, adding that the project will start generating power in 2023, if everything goes according to the plan.
Earlier in August 2012, the government had formally handed over the West Seti hydropower project – that was then aimed at domestic consumption – to the CWEI, after a memorandum of understanding was signed between the company and the Board. The board – that looks after mega projects – had then started preliminary negotiation with the project developer. But the NEA was hesitant to seal the deal as it was worried of power surplus by 2017 – as more power producers are generating power lately – whereas the Chinese developer was also not sure of the market, in case of power surplus in Nepal. The state power utility is the sole buyer of electricity developed by all the developers.
However, after Nepal-India Power Trade Agreement (PTA) recently, NEA and the Chinese developer, came near to agreement. The PTA allows both Nepal and India to buy and sell electricity.
The 750-MW project also got back on leak after the visit – in March end – of China Three Gorges Corporation chairman Lu Chun, who met with the premier Koirala to discuss the issues of resettlement and rehabilitation of the displaced families by the project.
The Board has also decided to charge $1,500 per MW in negotiation fee for Power Development Agreement (PDA) as the project is not handed through open bidding like Upper Karnali and Arun III. The developer has to pay the fee either the negotiations become successful or unsuccessful. A seven-member team has been formed under Pant for the negotiation.
The project was envisioned some two decades ago as Snowy Mountain Engineering Corporation (SMEC) had shown interest in developing the project. The first study was also conducted in 1987. The government was however forced to revoke the licence of the Australian company as it failed to start work after repeated renewal.
Meanwhile, the Board also decided to amend the project negotiation agreement for Tamakoshi III hydropower project. The chief executive is authorised for the amendment. It has also decided to form an expert committee to review the amendment.

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.

Investment Board begins parley with developers on PDA template

Nepal Investment Board has launched formal round of discussions with developers on the legal framework of the Project Development Agreement (PDA) Template for large hydropower projects above 500MW.

The agreement – drafted by leading global firm Herbert Smith in consultation with Nepali legal counsel– ensures balanced and bankable deals that fully benefit and protect the country’s interests while ensuring a fair return to investors, according to chief executive of the board Radhesh Pant.

Herbert Smith has recently been appointed legal advisers to the Investment Board to assist the Board in its negotiations of detailed, tailored PDAs with each of the developers.

Pant also shared that initial discussions with three developers of the four export oriented projects – 650MW Tamakoshi 3, 600MW Upper Marsyangdi 2, 900MW Upper Karnali and 900MW Arun 3 – was held to ensure a common understanding of the legal terms in the PDA template and to listen to and respond to any remaining concerns as a crucial first step towards kick starting bilateral negotiations tailored to individual projects.

“Our preliminary discussions with SN Power, Sutlaj JVN and GMR to clarify legal issues on the PDA template went very well,” he said, adding that the board has clarified that Nepalis and Nepal’s interests are first protected while ensuring a fair return to investors on any project.

The developers also understood and respected Nepal’s priorities and we re moving towards intensive bilateral negotiations in the next few months,”he added. “However, the meetings did not touch upon any commercial aspects of the PDA or any project specific concerns.”

The board was leading an exercise to assess the technical readiness of the four export projects in terms of legal, economic, financial and technical issues, which would inform the negotiations with each of the three developers.

He also shared that two initiatives were currently underway –Benefit Sharing Exercise that aims to ensure that spin offs from mega projects reach true beneficiaries – for the local communities affected directly by hydro projects and Industrial and Employment Benefits Plan that seeks to develop a services and supplier base so that domestic industries can meet developer demands while ensuring on time budget delivery.

“It will leave local communities with improved livelihoods, labour force with job opportunities and industries with the opportunity to supply quality goods and services at competitive prices,” Pant said, adding that these exercises will help us develop frameworks to be included in the PDA and negotiated with developers.
The four projects aimed at the Indian market will have an installed capacity of 3,050MW, and will first aim to satisfy Nepal’s domestic power needs. Of the four, 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 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.

Nepal signs BIPPA with India

Nepal today signed Bilateral Investment Protection and Promotion Agreement (BIPPA) with India to boost Indian investors’ confidence on Nepal.
The agreement will also help reduce doing business cost of the two countries as the investment of one will get equal treatment in the other country.
Minister for Industry Anil Kumar Jha and Indian Finance Minister Pranab Mukherjee signed the agreement on behalf of their respective countries in the presence of the Prime Minister of both the countries.
However, the agreement will be implemented only after exchange of diplomatic notes confirming that the legal requirements have been fulfilled for the entry into force of the agreement.
According to the agreement, "if an investor of a country suffers losses owing to war or other armed conflict, a state of national emergency or insurrection or riots in the territory of the other country will be given equal treatment, as regards restitution, indemnification, compensation or other settlement, no less favourable than that it accords to its own investors. Resulting payments shall be freely transferable."
India is not only the largest trading partner of Nepal but also the biggest investor in Nepal. Indian firms are the biggest investors in Nepal accounting for about 47.5 per cent of total approved foreign direct investments (FDIs).
There are about 150 operating Indian ventures in Nepal engaged in manufacturing, services — banking, insurance, dry port, education and telecom — power sector and tourism industries.
India is the seventh country to enter into BIPPA with Nepal as the country has already signed BIPPA with France, Germany, Britain, Mauritius, Qatar and Finland, though they do not have significant investments in Nepal.Due to insufficient internal homework Nepal however could not sign Double Taxation Avoidance Agreement (DTAA) and Power Trading Agreement (PTA).
DTAA will make the Indian investors feel more confident to invest in Nepal as they do not have to pay tax in both the countries. Currently, an Indian investor has to pay tax in its profit in Nepal and after taking it to India, it has to paty tax to the Indian government too. The Double Taxation Avoidance Agreement will exempt the tax payment on profits of Nepal in India.
Similarly, PTA will help Nepal, at present, and India, in the long run, to import and export more power cross border. According to current rule, Nepal can import only 50 MW of power from India. But the new agreement will pave way for more power trading.
The agreement will simplify Indian investors in Nepal like GMR (Upper Karnali) and Sutlaj (Arun III) to sell power to India after they complete their hydel projects in Nepal.