KATHMANDU, Sept 6: The Investment Board Nepal (IBN) has received an application from the promoter of Upper Karnali Hydropower Project with the call to extend the project’s construction tenure. 

Indian company GMR Group, which holds the license to develop the project, has requested IBN to extend construction deadline, citing its inability to mobilize investment. 

GMR was awarded the contract to develop the 900-megawatt Project located on Karnali River in Surkhet, Dailekh and Achham districts through an international bidding in 2008. 

The company has been unable to manage funds to develop the project even though it has nearly been three years since the signing of the Project Development Agreement (PDA). 
The deadline for financial closure is expiring in 25 days.

IBN CEO Mahaprasad Adhikari said that the GMR has applied for extension of tenure and that discussion on its application was undergoing. 

The government had extended the project’s tenure by a year in the last fiscal year, responding to the company’s request. 

The company has been stating that it has already signed Power Trade Agreements (PTAs) with Bangladesh for 400 MW and the Haryana State of India for 200 MW. However, it has not submitted the PTA and Memorandum of Understandings (MoUs) signed with banks and financial institutions (BFIs) for loan investment in the project.

As per the PDA, the company has to achieve financial closure within the years of the signing of the agreement. But the company has failed to arrange resources to build the project even though the yearlong extended term is ending soon. 

Representatives of the company had also held discussions on the matter with Minister for Energy Mahendra Bahadur Shahi on September 1. They met the Minister Shahi after the later made a public statement, saying that the government would scrap license of projects which are not moving ahead as per the specified time-frame.

The project representatives, at a program organized in Kathmandu, some time back, had stated that necessary preparations were being made to mobilize required financial resources to develop the project. 

A bank branch has been set up at Dab in Dailekh district for distribution of compensation to the project-affected locals. Compensation needs to be provided to a total 426 households as per the rehabilitation and resettlement action plan. 

The project is providing Rs 895,000 per ropani as compensation for the land acquired by the project. The government and the GMR signed a MoU to develop the project on September 19. The IBN has already eased the process for the company to use forest area to develop the project. 

The Ministry of Forests and Soil Conservation has decided to provide 252.72 hectare of land in Dailekh and Achham districts for construction of the project’s tunnel, reservoir and power house. 
Sattala, Singaudi, Layati Bindrasaini, Nepa, Naule Katuwal and Khadabada in Dailekh district; Pokharikanda, Chhapre and Salkot in Surkhet district; and Bhairabsthan, Rahaf and Raniban in Achham districts are directly affected by the project.

The project will build a 150-ft dam at Dab of Dailekh and channelize the waters of the Karnali River through a 2.5-km tunnel to the powerhouse to be built at Balde of Achham. 

GMR will give the government 27 percent of the shares in the project as well as 12 percent of energy free of cost. The project is estimated to cost Rs 116 billion.

 
• gmr
 
• extension
 
• financial closure