Upper Karnali, Arun III devlopers get one more year to complete financial closure

Published On: January 9, 2017 01:20 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Jan 9: Investment Board Nepal (IBN) on Sunday extended the deadline to the developers of Upper Karnali and Arun III projects to complete financial closure by a year.

The decision means the developer of Upper Karnali and Arun III must complete financial closure by September 18 and September 30, respectively.

Maha Prasad Adhikari, the CEO of IBN, told Republica that the deadline has been extended as per the provision in the Project Development Agreement (PDA) that the IBN has signed with the two developers. He also clarified that the extension is not due to force majeure.

The two-year deadline given to Indian infrastructure major GMR to develop the 900-megawatt Upper Karnali expired on September 18, 2016. Similarly, Satlej Jal Vidyut Nigam (SJVN) had to complete financial closure for Arun III (900 MW) by November 24, 2016. Both the developers had sought deadline extension, citing impacts of the 2015 earthquake and delay in acquiring forest land, among others.  

“The delay in providing government-owned land, including forests, to both the projects as well as the delay in signing Power Purchase Agreements by the developers was the reason for deadline extension,” added Adhikari.

The government has to provide 273 hectares of forest land to GMR, while Arun III has sought the government's approval to use 125 hectares of forest land. Both the projects are in the last leg of acquiring private land. Acquiring forest land is becoming a herculean task for both the projects as the Ministry of Forest is not ready to relax the mandatory provision of developing forest equivalent to areas deforested by development projects.

The meeting has also pledged to provide forest land to the projects within two months following a needful procedure.

Both the developers have to begin construction works after completing financial closure.
The first board meeting of IBN after Prime Minister Pushpa Kamal Dahal assumed office in August last year also decided to ask both the developers to furnish their plan of completing financial closure at the earliest.

Meanwhile, IBN has waived the project fee of 0.2 percent of the project cost for Kathmandu Valley Integrated Solid Waste Management Project. The waiver paves the way to start negotiation of the project which aims to manage valley's waste and produce fertilizer as well as generate electricity. Selected parties had refused to sit in the negotiations, stating that they had entered into the contract process before the IBN was formed and before the provision of project cost was introduced.

The IBN also decided to form a panel led by a member of the National Planning Commission (NPC) to conduct a study on metro rail in Kathmandu Valley in public private partnership modality. The panel will also looks for ways to make the project financially viable by managing Viability Gap (VGF) for the project development. 

VGF is arranged to make projects more feasible for investors.

Likewise, IBN has also decided that it will work jointly with the Ministry of Energy to finalize the development modality of Tamakoshi III.

Leave A Comment