West Seti Hydropower Co poised to lose licence

KATHMANDU, JUL 25 -

It’s going to be curtains down for the much talked about West Seti Hydropower Company Limited (WSHPL). Fifteen years after it acquired survey licence for the 750 MW West Seti Hydropower Project, WSHPL is all set to lose the licence.

A high-level official at the Energy Ministry said the ministry has already recommended to the government to scrap WSHPL’s licence. “The ministry has already forwarded the decision to the Cabinet,” said the source. According to the source, the upcoming Cabinet meeting would take a decision to this effect.

Of late, Energy Ministry officials have been hinting at WSHPL’s licence annulment. The government in June had sought WSHPL’s clarification on why should it not be closed. The government then had said that it would move ahead with the licence cancellation process if the company failed to come up with a reasonable answer.

The scrapping of WSHPL would mark the end of the country’s one of the ambitious hydropower projects. The project was originally designed as an export-oriented with 90 percent of the power to be exported to India. However, promoter WSHPL failed to move ahead with its construction whose cost was estimated at Rs 120 billion.

Failing to manage resources, WSHPL had proposed building the project under Public Private Partnership (PPP) model in January, 2011. The company had filed an application at the Department of Electricity Development (DoED) seeking extension of the deadline for financial closure of the project and also sought the government’s involvement in the project.

However, indicating that it would not extend the deadline, the Ministry of Energy (MoE) had sought the clarification from WSHPL for its failure to proceed with the construction of the project located in Doti and Dadeldhura districts.

WSHPL in its clarification to the government had said the government cannot terminate the agreement it reached with the company without giving a six-month notice. The company had also stated that it was trying to manage resources for the project.

WSHPL had signed an agreement with the government 16 years ago to construct the project under the build-own-operate-transfer (BOOT) model.

Australia’s Snowy Mountains Energy Corporation (SMEC) was the major promoter of the project.

The cash-strapped project got a boost when the China National Machinery and Equipment Import and Export Corporation (CMEC) decided to invest in it. CMEC even signed an agreement with WSHPL during the then Prime Minister Madhav Kumar Nepal’s China visit in 2009. CMEC President Jia Zhiqiang and WSHPL Director Himalaya Pandey had signed a memorandum of understanding in Beijing. The Chinese firm had decided to invest Rs 15 billion in the project.

However, CMEC later opted to pull out of the project saying that Nepal lacks an investment-friendly environment. Another important shareholder of the company, Asian Development Bank, also did not show interest citing lack of public acceptance of the project and lack of good governance.

The project received yet another jolt when the main promoter of the company SMEC stopped sending funds for office operations in August 2010. SMEC’s decision to stop funding was linked to the lack of interest shown by CMEC and ADB to pour in money in the mega project. SMEC, as the major promoter, has invested over $ 31 million in the project over the last decade.