The Chinese developer will have to arrange financing on its own
KATHMANDU, June 5: The government has formally awarded Budhigandaki Hydroelectric Project to China Gezhouba Group Co Ltd (CGGC).
Minister for Energy Janardan Sharma and Chinese Ambassador to Nepal Yu Hong signed a Memorandum of Understanding (MoU) for project development in the presence of Prime Minister Pushpa Kamal Dahal on Sunday.
China Gezhouba will build the project in EPC & F model under which the developer has to collect funds, build the project and hand it over to the government. EPC & F stands for Engineering Procurement and Construction, and Financing. This model is new for the country as projects like this are mostly in Build, Own, Operate and Transfer model. The project will be developed on the basis of 'acceptable international contract agreement'.
The cabinet meeting of May 23 had decided to entrust the works of building the mega project to China Gezhouba which is a Chinese government undertaking. It is involved in different hydropower in Nepal.
But it has a poor performance record.
The MoU signed on Sunday, however, is not clear itself on project cost. According to the project's DPR prepared by a French consultant, the project is estimated to cost Rs 261 billion.
According to the MoU, negotiations on the cost will be done after receiving technical and financial proposal from CGGC within a year. It, however, can be renewed on mutual understanding for a maximum of one year.
The MoU has clearly charted out the tasks of the government and CGGC.
“The government will officially communicate through diplomatic channel in order to secure required financing for the project from People's Republic of China under acceptable financing terms and conditions on government-to-government basis,” the MoU reads.
Similarly, the government has to provide all the documents/information/data regarding feasibility studies, environment impact assessment, detailed design and related information of the project, and also apprise and evaluate the technical and financial proposal prepared and submitted by CGGC at the earliest.
The MoU further states that China Gezhouba has to cooperate and collaborate with Chinese financial institutions to design an appropriate financing structure of the project with the assistance of the Government of Nepal, and permit representatives of Chinese financial institutions to visit the project site. CGGC will have to bear the costs involved for such visits on its own.
Likewise, CGGC will have to ensure that all procurement process will be done in a competitive and transparent manner. A joint steering committee, having five representatives from each side, will be instituted within two weeks to oversee project implementation. “The committee will meet at least once in every two months and it will monitor the proper implementation of the MoU. Similarly, both the parties will evaluate the works every quarter,” it added.
The 263-meter dam of the project will form a reservoir which will be about 15 times larger than the Fewa Lake. The project will generate 1,330 GWh of electricity annually.