GMR commits to finalize financial closure within two years

Published On: August 2, 2022 02:42 PM NPT By: Republica | @RepublicaNepal

KATHMANDU, August 2: Indian company GMR, the promoter of the Upper Karnali Hydropower Project, has expressed its commitment to manage the project's finances within two years.

The meeting of the Council of Ministers on July 15 decided to extend the deadline for GMR to do so by two years. With the extension of the deadline by the Council of Ministers, GMR has committed to manage the project's finances within the specified time.

The government has extended the deadline of this project till the end of July 15, 2024. Srinivas Bommidala, chairman of Energy and International Airports, GMR Group, issuing a press statement said that the financial management of the project will be arranged within the deadline extended by the Nepali government. “The financial closure extension approved by the cabinet is a strong proof of full support and appreciation of our efforts toward successfully developing a tri-nation transformational export-oriented hydropower project, which will supply power to Nepal, India and Bangladesh,” he said, “With this development, we can now move forward toward achieving the remaining pre-financial closure milestones and complete the process within the approved timeline.”

Chairman Bommidala claimed that the company is committed to delivering the project as per the commitments made to the Government of Nepal.

The company has also reached the stage of Power Selling Agreement (PSA) with Bangladesh Power Development Board and India's NTPC Vidyut Vyapar Nigam (NVVN). He also claimed that the PSA will be done within the extended time frame.

The 51st meeting of the Investment Board Nepal held on June 6 under the chairmanship of Prime Minister Sher Bahadur Deuba recommended to the Cabinet to extend the deadline with the condition that the developer of the Upper Karnali Hydropower Project, GMR Upper Karnali Hydropower Company Limited, completes the financial management within 24 months.

Based on the same recommendation, the meeting of the Council of Ministers held on July 15 decided to extend the project’s deadline by two years. On October 9, the government formed a task force under the coordination of Vice Chairman of the National Planning Commission (NPC) Biswo Nath Poudel to study whether to extend the deadline for the Upper Karnali Hydropower Project.

Although a deadline of 45 days was set for the task force under the coordination of Poudel, the vice-chairman of NPC, the report was submitted after the deadline. Based on the report given by the task force, the deadline of the Upper Karnali project has been proposed to be extended by two years with conditions.

Even after eight years of signing the Upper Karnali Hydropower Project Development Agreement (PDA), GMR has not been able to complete important tasks including the power purchase and sale agreement and financial management of the project. A PDA was signed by Investment Board Nepal and GMR on September 19, 2014. According to the agreement, the project was set to be completed within seven years.

According to the agreement, the PPA and financial closure of the project were to be completed within two years of the project and the construction was to be completed within the remaining five years. Even after eight years of the PDA, the Indian company has not been able to manage the electricity purchase and sale agreement and financial closure of the project, let alone the construction of the project.

However, recently the cabinet meeting decided to extend the project’s deadline by two years with conditions after almost three years of the project missing its deadline.

The Bangladesh Power Development Board issued a Letter of Intent (LOI) on January 30, 2020, to purchase electricity generated from this project. The LOI had opened a way for advancing the PPA. It had been said that the agreement would include Bangladesh purchasing the electricity produced by GMR at 7.712 cents (US currency) per unit.

GMR has estimated the cost of the project, which is to be built on the Engineering Procurement and Construction (EPC) model, to be USD 1.5 billion. The project falls in Achham, Dailekh and Surkhet districts. For the construction of the project, two tunnels will be constructed and 322 hectares of land will have to be acquired. The electricity generated from the project will be exported to India and Bangladesh using a 99 km double-circuit transmission line of 400 kV. The government of Nepal and GMR reached an agreement to build the project in 2008.