Himalayan Bank, Bank of Kathmandu may get their guarantee money back soon

Himalayan Bank Ltd (HBL) and Bank of Kathmandu (BoK) might get their guarantee amount against the Chinese company back soon as a Chinese high court has today decided to review the earlier district court decision.
Henan Province’s People’s High Court ordered the review of the February 15 decision of district-level Zhengzhou Intermediate Court – in favour of China Construction Bank (CCB) – for which HBL and BoK had given counter guarantee in the Melamchi Drinking Water Project.
Himalayan Bank said that the decision of the Chinese high court to review the case is a positive step, and it is optimistic about receiving the counter guarantee amount soon.
Earlier on February 15, the Zhengzhou Intermediate Court had decided in favour of the Chinese contractor in the lawsuit filed against China Railway 15 Bureau, citing violation of underlying contract between China Railway and Melamchi Drinking Water Project.
HBL had issued $6.665 million as performance guarantee, while BoK had issued $6.2 million and 1.40 million euros as advance payment guarantee to Melamchi Water Development Board to provide the counter guarantee to CCB. The CCB was the guarantor for the project contractor China Railway 15 Bureau Group.
According to the international law, the guarantee provided to both Nepali banks by CCB is an independent and unconditional obligation. The bank should receive the money back from China as per the international law and practice, but the Chinese company has been delaying due to court procedure.
The China Railway 15 Bureau Group had been contracted to build a 27-km-long tunnel for the Melamchi project, before appointing the Italian contractor Cooperativa Muratori and Cementisti di Ravenna.
The agreement between Melamchi Drinking Water Project and China Railway 15 Bureau Group was cancelled after the Chinese contractor demanded more funds than agreed in the bid document to complete the work after missing the completion deadline.

Melamchhi Board shortlists two companies to complete project

Melamchi Water Supply Development Board has shortlisted two companies to complete the remaining works of the much-talked project – that has become a national shame – that has been stalled for months now.
“Sinohydro Corporation and High Himalaya Hydro Construction Pvt Ltd have been shortlisted for the remaining works of the major water supply project,” the board said, adding that few companies had initially shown interests but only the two companies actually bid for the project.
“Four months after the works came to a halt at the project site, the government had announced a fresh bidding for completing the project,” according to deputy executive director at the Board Ram Prasad Kharel. “The contract between Italian contractor Cooperativa Muratori e Cementisti di Ravenna (CMC) and the government was terminated after a ‘financial dispute’ that has been dubbed as suspicious as the lawmakers in the parliamentary committee blamed the minister for asking bribe.
The government has decided to divide the remaining works into small packages and distribute them among various contractors, he said, adding that it will help expedite the project. “The remaining works were broken down into two big packages – headworks and tunnel finishing – and eight other small packages, which will be assigned to local vendors and suppliers who have earlier worked with the CMC.”
“We have a total of four biddings, two each from both interested builders for completing headworks and tunnel,” Kharel added.
After selection, the companies will have 15 months to complete the headworks and 12 months for the tunnel portion abandoned by the Italian contractors last December, which means the completion of the projects has been delayed by a minimum of one-and-a-half years.
The first phase of the much-talked about water supply project will bring in 170 million litres of water from Melamchi River to Kathmandu Valley.
The technical proposals of bidders have been opened, he said, adding that technical details are currently under evaluation. “Once the technical proposal is evaluated, we will forward our observations to the main development partner of the project Asian Development Bank.”
The approval of ADB is key to move ahead before the board finally selects the contractor.

Tanahu Hydropower terminates CMC contract

Tanahu Hydropower – the developer of 140-MW Tanahu Hydropower Project located in central Nepal – has terminated the contract signed with Cooperativa Muratori e Cementisti di Ravenna (CMC) that was appointed to execute one of the important components of the power plant.
The storage type project – the wholly owned subsidiary of Nepal Electricity Authority (NEA) – today dispatched the termination letter to the Italian contractor – though it will delay the project – after it failed to mobilise the work force despite repeated directions from the employer.
The NEA in October had selected two contractors – one CMC and another Chinese – for the $550 million hydropower plant. The project appointed CMC and asked it to start work by February 11. But CMC asked for advance payment before it starts the work. According to the managing director of the project Pradeep Kumar Thike, the project couldn’t release the advance payment because the Italian contractor didn’t submit the full bank guarantee to qualify for such payment. "Therefore, we had no other option but to send the contract termination letter to the CMC,” Thike, said, adding that the project will initiate a new process to appoint another contractor. "But it will delay the project by at least six months."
Though, the Chinese contractor – Sinohydro Corporation hired to execute hydromechanical and electromechanical works under the second package of the project – has started work at the site, the construction of the entire project will be affected as the tasks of the two contractors are interrelated.
Earlier, Melamchi Water Supply Development Board has also terminated the contract with the Italian contractor after it failed to come back after the warning notice.
The reservoir-type project – with an estimated annual energy generation capacity of 587.7 gigawatt hours in the first 10 years of operation – can generate energy for six hours daily during the dry season. The project is being developed with credit facility extended jointly by the Asian Development Bank (ADB), Japan International Cooperation Agency (JICA) and European Investment Bank (EIB). 

Government formally cancels contract with CMC

Though, the Ministry of Water Supply is still trying to negotiate, the board of Melamchi Water Supply Project has formally cancelled the contract of the project with the Italian contractor today as the contractor failed to resume construction works within the deadline of the government notice.
According to executive director of the project Surya Kandel, the deadline of the ‘notice to contract termination’ that was issued to Co-operativa Muratori e Cementisti (CMC) di Ravenna (CMC) had expired today. The Melamchi Water Supply Development Board had sent a final letter to CMC to resume the remaining works on January 21 but the CMC has not replied yet. "The deadline is over and the contract with CMC has been formally terminated," he said, adding that the project has made multiple efforts to establish communication with the CMC officials but the contractor did not respond.
The contract – which had a legal provision – reads that the agreement would be automatically terminated, if the contractor did not resume construction activities within two weeks of receiving ‘notice to contract termination’.
Earlier, CMC had – from its side – terminated its contract with the project citing its bankruptcy. But the government did not accepted termination letter of CMC – as the project was in the final stage of completion – and asked the contractor to continue the work.
The project is preparing to assign the remaining works to local contractors, he said, adding that the project is preparing legal documents to assign the remaining works to local contractors.
The termination of the contract with CMC is, however, going to delay the construction of the Melamchi Water Supply Project, which was expected to be completed within a couple of months.

ADB green signal to appoint new contractor for Melamchhi

Asian Development Bank (ADB) has given green signal to the Melamchi Water Supply Project to appoint a new contractor to complete the remaining works of the much-awaited water project.
During the consultation with the multilateral development partner, the project has sought a way out to expedite the works of Melamchhi, according to spokesperson of the project Rajendra Prasad Panta. "The project is preparing to scrap the contract with the Italian construction company Co-operativa Muratori e Cementisti (CMC) di Ravenna," he said, adding that the project has also recommended entrusting the responsibilities to carry on the project’s remaining work to the subsidiary construction companies as it would take a while to call for tender.
The project would wait for 14 days for a response to the letter from the Italian construction company CMC di Ravenna for scrapping the contract, according to the agreement between the government and the contractor. According to the contract – the government has signed with CMC – the government must send a ‘termination letter’ notice to contractor giving it a 14-day ultimatum to resume the project works. In case CMC fails to resume construction works within 14-day ultimatum period, the contract will be terminated automatically, as per the legal provision.
The project work would be forwarded from February 2.
According to the Project, of the complete tunnel measuring 27.5-km – from Ambathan of Sindhupalchok to Sundarjal of Kathmandu – still some 410-metre of tunnel's finishing works is yet to be completed.
Similarly, some 885 metres of tunnel await reinforced cement concrete works and two of three ventilators are yet to be rebuilt. Ventilation has been made in the tunnel – stretching from Gyalthum to Ambathan – while drilling needs to be done for ventilation from tunnel spanning Sundarijal to Sindhu and Sindhu to Gyalthum.
Likewise, installation of big galvanised iron (GI) pipes to bring water from the outlet of the tunnel at Sundarijal to water processing centre is also left to be carried out. Apart from that a regular monitoring system has also to be put in place.

Government still claims Melamchhi water will come on time

The government is terminating the contract with the Italian contractor of Melamchhi Water Supply Project – Cooperativa Muratorie Cementisti (CMC) di Ravenna – claiming that the already delayed project will complete on time. As less than five per cent work remains to bring the Melamchi water to Kathmandu, it is still possible to meet the deadline, claimed the project official.
The project has vowed to complete the remaining work of the Melamchi – even by awarding a new contract through a fast-track process – on time. But the cabinet has to decide on awarding the new contract as a special arrangement allowed by the Public Procurement Act (PPA). If the cabinet decides to award the contract for the remaining work to a new contractor, MWSP officials say, they can bring water to Kathmandu by mid-April. However, the Prime Minister has left for Davos yesterday – to take part in rich-nations club – for a week.
There are only five things remain to be done – fitting ventilation shafts in the tunnel, fixing three gates in the tunnel, finishing work in around a 500-meter stretch of the tunnel, some tunnel maintenance work, and construction of temporary coffer dams to divert the water to the tunnel, according to the consultant for the melamchi – EPTISA Engineering Services – has already did an assessment of the project site, evaluated the amount of remaining work and calculated the estimated costs, according to the ministry.
But it will take some more time to complete permanent construction of the dam and also complete the second phase of water treatment plant at Sundarijal. But water can be brought to Kathmandu even without completing the permanent construction works, the ministry claimed.
Secretary of the Ministry of Water Supply Gajendra Thakur today claimed that the Ministry of Water Supply will table a proposal at the cabinet for the purpose immediately after the process to end the contract with CMC di Ravenna is formalised. The Public Procurement Act 2007 has a provision to allow fast-track procurement by the cabinet, but the decision has to be appropriately justified.
The project has today formally started the process to terminate the contract with the CMC di Ravenna, which left the project site over a month ago, after the government did not pay compensation it had asked. The project office has sent a ‘notice of termination’ to the contractor and the notice, according to the procurement law, allows the contractor to correct its course within the 14 days. 
The contract between the project and the contractor – signed in 2013 – for tunnel works and building a dam will be terminated after 14 days, if the contractor fails to turn up at the project site. The project board meeting last Tuesday had decided to wait until Friday for the Italian contractor to return to the project site, which was almost unlikely.
After the termination of the contract, the government will seize all the equipment and construction materials of the Italian firm from the project site. The government will also seize two separate bank guarantees of Rs 1.34 billion and Rs 1.21 billion from Standard Chartered Bank and Nepal Investment Bank. But the Italian contractor owes Rs 1.3 billion to the local sub-contractors and suppliers. The government is claiming that it can pay the local sub-contractors and suppliers from the bank guarantee.

Government finally decides to terminate contract with CMC

The government is scrapping the contract with Co-operativa Muratori e Cementisti (CMC) di Ravenna, the Italian contractor of the Melamchi Water Supply Project, pushing the national pride project into further uncertainty.
Scrapping the contract with CMC will delay the construction of the Melamchi Water Supply Project – that was expected to be completed by the next few months – the termination of contract with CMC also means that the government has to follow a lengthy process to hire a new contractor for the project. A regular process to hire a new contractor would mean the project will be pushed at least a year further. First of all, there should be a global tender which requires at least 45 days of notice. Then following the guidelines of the Asian Development Bank (ADB), the development partner, would require at least eight-nine months. The ADB needs to seek consent from its headquarters for any project above Rs1 billion and then more time will be required for correspondence, selection and evaluation of the contractor.
Less than 5 percent of work remains on the project, which will divert 170 million litres of water every day to Kathmandu from the Melamchi river in Sindhupalchok.
But the meeting of the Water Supply Development Board yesterday decided to terminate the contract with the Italian contractor and publish a ‘termination letter’ notice giving CMC a final chance to resume works.
According to the contract – the government has signed with CMC – the government must send a ‘termination letter’ notice to contractor giving a 14-day ultimatum to resume the project works. In case CMC fails to resume construction works within 14-day, the contract will be terminated automatically.
According to executive director of Melamchi Water Supply Development Board Surya Kandel, the government however cannot ‘legally’ terminate the contract with CMC before February 10 – the project contract period of CMC – as the dispute resolution committee of the water project had earlier made a decision that the government cannot scrap the contract with CMC till that time.
“The government formally dispatched a letter of termination to the Italian contractor CMC di Ravenna after it failed to come up with any concrete decision regarding resuming works,” Kadel said, adding that the project has decided to terminate the contract with the existing builder after it did not turn up to resume works even a month after abandoning the project."
In its previous letter sent last Tuesday, the government had set a Friday deadline for the CMC to make it clear whether it was interested to resume works and how it would want to resolve the dispute.
According to Kadel, the Italian builder did respond but sought at least one more week. “We received a meaningless correspondence which had not even come from the proper channel…..and it just sought more time," he added.
However, CMC official claimed that they had said a meeting was possible at a suitable time-around January 27 or so and "we had also sought diplomatic assurances."
But the government has decided to begin the process to scrap the contract with CMC after officials of the Italian company – who had left for their countries to celebrate Christmas – failed to return to complete the project. They have also not tried contacting the government since they left the country.
"We will soon send the notice of ‘termination letter’ to the CMC office in Italy,” said secretary at the Ministry of Water Supply Gajendra Kumar Thakur.
Earlier, CMC had terminated its contract with the project citing the company’s bankruptcy. However, the government had not accepted the termination letter of CMC as the project was in the final stage of completion. The government let the CMC officials go home to celebrate Christmas after their commitment to return. The Italian embassy in India and the Consulate General of Italy in Kathmandu had assured the government of their return. But the officials' failure to return has forced the government to begin the contract termination process with CMC.
Police on the night of December 16 had apprehended Italian staffers of the contracting company, accusing them of abandoning the project and trying to flee the country.
The CMC official said that the government cannot terminate the project which it had already scrapped after the government failed to pay the dues. "Melamchi project remains terminated by the CMC," the CMC official said, adding that the employer (Nepal government) cannot terminate something which is not in place."
The Italian contractor had first submitted the project termination letter to the government in the third week of December, saying the government had failed to pay Rs 350 million that it owed to the builder as per a decision by the Dispute Adjudication Board (DAB).
Since then the CMC has maintained that as the Nepal government had not paid the amount decided by the DAB within the deadline, they reserved the right of terminating the project. But government officials have refuted the CMC claim.
But in an interesting turn of events, the CMC had withdrawn the termination letter after its staffers were allowed to leave the country. They had subsequently flown out of the country. 

Stop politicisation of development projects: ADB

One of Nepal's important development partners has asked the government to stop politicisation in development activities.
Addressing the first Tripartite Portfolio Review Meeting (TPRM) of the year 2017 country director of ADB Nepal Resident Mission Kenichi Yokoyama today asked the political parties to refrain from or abandon "the practice of so-called 'bhagbanda' – division of spoils – by all means, to ensure timely project execution."
Saying that the ADB-funded projects have shown notable improvement in the year 2016, he attributed the success to project readiness, project leadership and human resources, procurement, contract management, safeguards, and addressing complex local issues. "Nevertheless, we must also say that the progress is just half way through, compared with our target of making annual execution – contract awards and disbursement – at par with annual lending – new commitment – level of $300 million in recent years,” he said, highlighting the critical importance of having competent project directors.
"Specifically, there is very high correlation between the strong project leadership and the performance of the project, ie, project performance is stronger where it is led by a competent project director," he added. "The rapid progress of flagship projects such as Melamchi and SASEC power and transport projects are testament to this."
He also asked the two-day TPRM to discuss and agree on critical issues related with high-attention projects, like ensuring timely completion of the Melamchi and Kathmandu water distribution projects to deliver water to Kathmandu by October 2017, while advancing reforms of Kathmandu Uptyaka Khanepani Ltd (KUKL) and addressing environmental concerns and bringing the problem projects like Tribhuwan International Airport (TIA) that is under deep trouble despite urgency of completing the works amidst heavy air traffic congestion, back on track; among others.
In 2016, ADB's Nepal portfolio's financial performance in terms of contract award totaled $359 million and disbursement totaled $202 million, both highest in ADB's operational history in Nepal.
"Enhanced readiness of new projects and strong project leadership in some projects has contributed to this achievement," DDG at the ADB South Asia Department Diwesh Sharan said on the occasion.
ADB's portfolio in Nepal is growing; and as of end 2016, cumulative assistance, since its operation in 1969 in Nepal, stands at $4.9 billion and the active net portfolio stands at almost $2 billion for 34 investment projects. "Clearly, Nepal's portfolio performance has improved. However, challenges remain," he said, adding, "Of the active portfolio, 44 per cent or $883 million is uncontracted and $1.3 billion remains undisbursed."
It is the lowest as a percentage of the active portfolio (66 percent), and compares well with the ADB average (for 2015) of 44 per cent and 64 per cent, respectively, he added.
The corresponding contract and disbursement ratios were 30.5 per cent and 16.1 per cent, respectively. "However, given the pending amounts to be committed and disbursed, we are all here to collectively and very specifically, identify the issues project by project, and agree on actions to improve project implementation," Sharan added.
Nepal's performance has improved steadily in recent years but challenge remains, he said, asking stakeholders to focus on efforts to ensure higher readiness, further improvements in procurement documents and evaluation scrutiny, stringent contract management to contain high implementation and fiduciary risks, and sound safeguard management, including environmental management, such as dust control.
Likewise, he also highlighted the slow progress of some of the flagships projects, including Earthquake Emergency Assistance, Tribhuvan International Airport, Gautam Buddha Airport, SASEC Power and Road. Though Melamchi Water Supply Project is expected to deliver water to Kathmandu by October of this year, he asked the bank's officials to very closely monitor the progress and measures to accelerate as needed, to ensure target can be met for this much anticipated major accomplishment.
Addressing the programme, as the chair of the inaugural session, finance secretary Shanta Raj Subedi said that the better performance does not happen by accident. Asking the development partners to join hands with ministries in monitoring the projects, he asked ADB officials to brainstorm for two days and bring out doable solutions to expedite the projects.
Likewise, chief of International Economic Cooperation and Coordination Division of the Finance Ministry Baikuntha Aryal, listed some of the problems including project readiness, procurement problems, weak implementation capacity, lack of interagency coordination, resource constraints, social and political issues, project reports, monitoring and supervision, and also problems with development partners as factors that have hold the development projects back.

ADB to finance 2nd phase of Melamchi project

The Asian Development Bank (ADB) has expressed willingness to finance the second phase of the Melamchi Water Supply Project (MWSP) after the first phase concludes in October.
Addressing journalists in Kathmandu today, ADB vice president Wencai Zhang said that on the basis of the advancement of the Kathmandu Upatyaka Khanepani Ltd (KUKL) reforms to become customer-oriented water provider, ADB was ready to extend assistance for the second Melamchi project to extend tunnel to the Yangri and Larke rivers to further augment water supply from the tunnel from 170 million liters per day (MLD) to 510 million liters per day. "This will make possible continuous supply of water to people in Kathmandu Valley, 24 hours a day, seven days a week," he added.
Zhang, who is currently on a 3-day official visit to Nepal, also acknowledged the progress of the Melamchi Water Supply Project and Kathmandu Valley Water Supply Improvement Project that are likely to start delivering Melamchi water in October 2017, and agreed on maximum mutual efforts to complete the project in time.
In this connection, both sides also agreed on expediting institutional strengthening of the KUKL including the restructuring of its board and implementation of the roadmap prepared by its management, such as ICT-based automated water distribution and billing, and deployment of middle managers and additional technical staff, he added.
Zhang also renewed ADB's commitment to support Nepal to prepare long-term socio-economic development vision, strategy, and economic transformation programmes toward achieving its goal of becoming a prosperous middle income country by 2030.
He conveyed readiness to support critical regulatory and institutional reforms in energy sector, and associated investments such as Dudhkoshi Hydropower Project (300 MW), and modernisation of electricity distribution systems in the Kathmandu Valley.
Zhang also participated in the Nepal Infrastructure Summit 2017, organised by the government and the Confederation of Nepalese Industries (CNI) yesterday. He delivered speeches in its opening plenary attended by Prime Minister Puspa Kamal Dahal, and a business session on enablers for accelerating infrastructure investments chaired by minister for Physical Infrastructure and Transport Ramesh Lekhak.
He is scheduled to visiting the site of Tanahu Hydropower Project in Tanahun district, and a dairy plant assisted by an ADB-funded livestock project in Kaski district tomorrow.
During his visit, Zhang also met with deputy prime minister and finance minister Krishna Bahadur Mahara, and other senior officials to discuss the overall direction of development partnership between the ADB and Nepal.
"The ADB stands ready to support Nepal in its aspirations to become a prosperous middle-income country by 2030 while achieving the Sustainable Development Goals," he said, commending that the much improved project implementation performance in 2016, achieving $358 million contract award and $201 million disbursement, both highest in ADB's operational history in Nepal, thanks to enhanced readiness of new projects and efforts to build implementation capacities including faster and more disciplined procurement and contract management.
"ADB has allocated for Nepal $843.8 million for 2017-2019," he added. "A further $356 million can be made available over the period for projects contributing to regional cooperation and integration and reduction of disaster risks and fragility, provided that Nepal continues to improve its performance of its ongoing projects."
Zhang is scheduled to meet Prime Minister Pushpa Kamal Dahal, minister for Water Supply and Sanitation Prem Bahadur Singh, energy minister Janardan Sharma and vice chair of the National Planning Commission (NPC) Dr Min Bahadur Shrestha tomorrow.

Key first section of Melamchi Water Tunnel completed

The key section of Melamchi Tunnel — 9.5 km from Sundarijal-Sindhu section — has been completed today. Today afternoon, the project developer used explosives to blast the two-metre section of the earth that divided the tunnel into two segments measuring 5,760 and 3,240 metres in length.
Along with completion of this section, 22-km of the total of 27.5-km tunnel of the Melamchi Water Supply Project has been completed as the tunnel construction has been carried out from Gyalthum-Ambathan and Gyalthum-Sindhu. Two similar breakthroughs are expected to be made in a few months.
The Asian Development Bank (ADB) and the government today celebrated the breakthrough of the first key section of the Melamchi Tunnel. When completed, the Melamchi Tunnel will carry to Nepal’s thirsty Kathmandu Valley 170 million liters of water per day from the Melamchi River and another 340 million liters of water from the Yangri and Larke Rivers by 2021.
“We are literally seeing light at the end of the tunnel,” said country director of ADB’s Nepal Resident Mission Kenichi Yokoyama. "We have been committed to this crucial project through thick and thin and are glad that water will soon start flowing.”
The just-completed 9- km tunnel section runs between Sundarijal at the end of the Melamchi Tunnel, where water will flow into a water treatment plant for distribution to Kathmandu residents, and Sindu, further upstream. Two other sections of the full 27.5-km Melamchi Tunnel will be finished in 2017 with the tunnel expected to start carrying water from the fourth quarter.
“It is a joyous moment to people who are instrumental in bringing the project to the current status," said joint secretary and executive director of the Melamchi Water Supply Development Board Ghanashyam Bhattarai. "We consider this achievement a major milestone towards completing the construction of one of the longest water diversion tunnels," he said, adding that they appreciate the support and cooperation provided by people of the Melamchi Valley.
“The tunnel construction will be completed by July and it will take another three months to supply water to Kathmandu Valley," he added. "This achievement has made us confident the water will be supplied to Kathmandu by next October."
According to Bhattarai, some 99 per cent work of the water treatment plant in Sundarijal has also been completed so far. Water from the Melamchi river will reach Sundarijal Treatment plant in 48 hours and it will be supplied to households within another 24 hours after treatment, he said. "Another 340 million liters of water daily will be brought from the Yangri and Larke rivers by 2021 through the same tunnel."
The ADB has provided a total of $145 million in loans for the $355.4 million Melamchi Water Supply Project and has been working since 2000 with the government to build the tunnel, 29 km of access roads and – with financing from the Japan International Cooperation Agency (JICA) – a water treatment plant. The April 2015 earthquake and and the blockade imposed by India created subsequent difficulties in getting construction materials were the latest setback to the project.
The project – that was initiated some 17 years ago and has become a prestige issue for the ADB – is also providing social development support to families in the Melamchi Valley like health, education, and income generation programmes.
Italian Contractor Cooperativa Muratori e Cementisti di Ravenna (CMC) started work on the project in July 2013 after the contract with the Chinese contractor was terminated in September over non-performance.
The ADB has lent Nepal $170 million through the Kathmandu Valley Water Supply Improvement Project to provide water connections and expand reservoirs so the 3.5 million people of the Kathmandu Valley can benefit from the new tunnel and receive affordable and reliable water.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members, 48 from the region. In 2015, ADB assistance totaled $27.2 billion, including cofinancing of $10.7 billion.

ADB provides additional $25 million to complete Melamchi Tunnel

The Asian Development Bank (ADB) will provide an additional $25 million loan to Nepal to complete the Melamchi tunnel and help alleviate a severe water shortage in the Kathmandu Valley.
"Once completed, Melamchi tunnel will be a lifeline for the people of the Kathmandu Valley," said director of the Urban Development and Water Division in ADB's South Asia Department Fei Yue. "The tunnel will not only bring the people of Kathmandu more clean water, but also support other downstream water supply and wastewater projects in the Kathmandu Valley."
More than 2.5 million people of the Kathmandu Valley have long suffered from inadequate and unreliable clean water supplies and have resorted to bottled water, collecting rainwater, or drilling wells, leading to increasingly polluted wells and falling water in key aquifers. Insufficient clean water has also undermined public health in and around Nepal's capital.
ADB approved a restructured $137 million loan in February 2008 for the then $317 million Melamchi Water Supply Project but the completion was delayed by political and economic uncertainties in Nepal, changes to the project design, and, most recently, the need to find a new contractor to complete the tunnel construction.
ADB's additional funds, along with an extra $13.1 million from the Government of Nepal, means the overall cost is now estimated at $355.4 million.
Under the project, Cooperativa Muratori e Cementisti di Ravenna, an Italian construction firm, is contracted to complete the 27.5-kilometer Melamchi tunnel by the end of September 2016. The tunnel will take 170 million liters of water per day from the Melamchi River to Kathmandu.
A water treatment plant, financed by the Japan International Cooperation Agency, is under construction in Sundarijal on the outskirts of Kathmandu that will treat the water brought through the Melamchi tunnel.
In addition, improvements to the Kathmandu Valley water transmission and distribution network are under way with an $80 million ADB loan, made in 2011, to take water from the treatment plant to households and reduce water lost to leakages. ADB approved another $80 million loan in April 2013 to expand and rehabilitate the sewerage network and build wastewater treatment plants to deal with more than 90 million liters of wastewater per day in the Kathmandu Valley.
As part of the overall Melamchi project, ADB is also promoting reforms in Nepal's urban water sector including creating an independent water management board, setting up an independent commission to regulate water tariffs, and establishing an autonomous company for water and wastewater service delivery in the Kathmandu Valley.

Melamchi appoints contractor for water treatment plant construction

The government and Austrian-Indian joint contractor signed an agreement today to construct a water treatment plant of the much-talked Melamchi Drinking Water Project (MDWP).

The prestige project of the Asian Development Bank (ADB) is going to be constructed with concessional loans of the Japan International Cooperation Agency (JICA).

The water treatment plant is one of the key infrastructure of the Melamchi Water project that has been since last one decade claiming to bring 170 million litres of water to the Kathmandu Valley every day.

Melamchi Water Supply Development Board, JICA and VA Tech Wabag Ltd-Pratibha lndustries, the contractor signed the agreement.

The treatment plant worth Rs 4.20 billion will have a total capacity of 850 million liters, will be used to treat water supplied by the 27-km-long tunnel of the Melamchi Drinking Water Project, which is expected to be completed by November 2015.

The Melamchi Board had invited bids for the construction of the plant on April 25, 2012 planning to award the contract by January 21 this year. But confusion between JICA and government on appointment of contractor from among the three; VA Tech Wabag Ltd-Pratibha lndustries, Japan’s Hitachi Technology and CWE China, delayed the contract award.

The earlier Chinese contractor had walked away without completing the work has also delayed the ambitious Melamchi Water Project putting pressure on Asian Development Bank as the project has become its prestige issue.

ADB to continue to support Melamchhi project

The Kathmanduites will have to wait again for two more years to drink water from Melamchhi river as the much awaited water supply project is going to be delayed from its original schedule to complete. The failure of contractor to complete tunnel construction — the major component of the project — that will divert raw water from Melamchi River to Sundarijal outlet in Kathmandu has also added cost to the project that has become a ‘prestige project’ for the Asian Development Bank (ADB).

However, ADB – the key financier of the project – neither wants to abandon nor indulge into any 'blame game for the failure' of earlier contractor to complete its task to construct tunnel and move ahead with the Melamchhi Water Supply Project that will pump 170 MLD water to the valley that has been waiting to quench its thirst since 2002.

"The ADB will neither blame anyone nor blacklist the contractor that has failed to complete its task, rather will bring in more money, if necessary, to complete the project," said director-general of ADB’s South Asia department Juan Miranda.

With ADB pumping more money, the government might also have to jack up its matching fund adding financial burden. "However, it is not finalised, yet," according to finance secretary Krishnahari Baskota.

"The earlier price quoted by the contractor was not right," Miranda said, adding that the project will select the new contractor — learning from past experience — on the basis of quality and cost both, unlike earlier process that was more concentrated on price only.

"We have prepared the specific actions to move forward, including the smooth settlement with the outgoing contractor, and swift selection of an internationally reputed, committed and dedicated contractor, who can deliver high quality infrastructure in a timely and efficient way," he added.

Melamchha Water Supply Project witnessed a big setback last week after the contractor 'China Railway 15 Bureau Group Corporation' that was constructing the 22.5-km long tunnel — the most expensive part — left only completing 6.5-km.

Chinese contractor claimed that it was withdrawing from the contract due to financial reason and lack of support from the board.

The project has three parts; the tunnel, tripping plant, and the treatment and distribution network in the Valley.

Originally projected to cost $464 million in 2000, ADB had to restructure the project due to withdrawal of other development partners in February 2008. After the restructuring, the project has been revised to cost $317.3 million and the ADB shouldered the largest financing share of $120 million.

"We will not let the Kathmanduites down," Miranda said, adding that the project will be completed by early 2016. "ADB is committed to alleviate acute water supply shortages for the 2.6 million people in the Kathmandu Valley."

However, the project was initially projected to complete by 2013 and with the latest turn of the events, Kathmanduites have to wait for two more years.

ADB director-general reiterates commitment to support economic development

The Asian Development Bank (ADB) will continue to work closely with the government of Nepal in helping to reduce poverty and promote inclusive growth for all Nepalis, said director-general of ADB’s South Asia department Juan Miranda at the end of his two-day visit to Nepal here today.
Miranda said that he has been following developments in Nepal with keen interest.
“ADB appreciates that Nepal has maintained steady economic growth and macroeconomic stability despite challenging conditions,” he said, stressing the importance of staying the course on economic reforms and development to address poverty and other development challenges as well as achieve higher economic growth.
During Nepal visit Miranda met with finance minister, vice-chair and members of the National Planning Commission (NPC), chief secretary, other senior government officials, development partners, private sector representatives, and the media.
His discussions focused on the need for addressing infrastructure bottlenecks with accelerated development project implementation and private sector investments, and building stronger capacities, governance systems, and enabling environment to support these ends.  
He sought the government’s support and active participation by all stakeholders in the formulation of ADB’s new Country Partnership Strategy for Nepal.  In this context it was agreed that ADB’s support would be more selective and focused addressing the country’s development constraints including energy, transport, urban and rural infrastructure, and skills development. In support of these priorities, ADB will also promote governance, private sector development, regional integration, gender and social inclusion, and climate change adaption.
Miranda also discussed the Melamchi Water Supply Project. “We had a productive discussion with the Ministry of Urban Development on the specific actions to move forward, including the smooth settlement with the outgoing contractor, and swift selection of an internationally reputed, committed and dedicated contractor who can deliver high quality infrastructure in a timely and efficient way,” he said, adding that ADB remains fully committed to providing the necessary support to the government to ensure that the project is completed by early 2016 or earlier, given the importance of the project to alleviating acute water supply shortages for the 2.6 million people in the Kathmandu Valley.
Miranda also discussed the country’s critical energy shortages and reiterated ADB’s commitment to supporting the Government in resolving the issue.
In meetings with the secretaries of the Ministries of Energy and Finance, he discussed the proposed 140MW Tanahu Hydropower Project, which is at an advanced stage of preparation. Discussion focused on the financing structure, and the need and steps to engage highly qualified construction supervisors and contractors to achieve timely construction of this critical infrastructure.      
During his meetings with development partners and private sector representatives, Miranda discussed the current situation in Nepal and highlighted the importance of closer collaboration between development partners and private investors in helping the government create a conducive environment for development.
ADB has worked in partnership with the government of Nepal since the country joined ADB as a founding member in 1966. As of 31 August 2012, Nepal has received 158 loans/grants —122 sovereign Asian Development Fund (ADF) loans ($2,775.88 million), 5 non-sovereign loans ($58.64 million), and 31 ADF grants ($742.25 million) - totaling $3,576.77 million in support.