The format, which will be applied while developing Tamakoshi III (650 MW), Upper Karnali (900 MW), Upper Marsyangdi (600 MW) and Arun III (900 MW) under build-own-operate-transfer (BOOT) arrangements, assures a 30 year concession period for the developers. It also sets the condition that the projects developed should last 100 years. [break]
What this means is, the developers will be allowed to own and operate mega hydropower projects for 30 years, and once the contract ends, the government will reclaim the ownership. But developers will still be able to operate the projects for the next 70 years. "This will protect the interests of both the people of Nepal and the power developers," said a senior IB official.
The PDA template equips the government with guidelines for negotiating sound hydropower deals. It aims to ensure maximum benefits in terms of revenue, spending, industrial employment benefits and electricity.
"The PDA ensures fair returns to the developers, enabling them to get financing at competitive costs. This agreement is bankable," said Radesh Pant, CEO of IB.
Among other things, the PDA template commmits to putting in place a timely mechanism for approval from the government and also promises that the government will fulfill its commitments. It seeks developers to follow the best-practice international environmental and social standards, ensures packages that benefit local communities and commits itself to fair resettlement and rehabilitation, Pant told Republica after the board endorsed the template on Thursday.
Prime Minister Dr Babu Ram Bhattarai, who chairs the IB, stated that the government will assure investors work on their projects will proceed unhindered.
The PDA is just an agreement template though. The IB will negotiate and tailor individual agreements for different projects based on project circumstances and economics, local community needs and aspirations.
The template clearly cites the roles and obligations of the government and power developers. In the event of disagreements, it assures impartial processes for quick resolutions.
It also deals at length with dam safety, appropriate design and maintenance and handover provisions. "Issues such as protection against basin silting are also covered so that these hydro assets continue to benefit the country for many decades after the investors hand them back to the government," Pant told Republica.
The PDA template furthermore provisions for full financial disclosure so that the government understands how it will benefit from projects. "Shareholder agreements -- yet to be drafted -- will ensure profit and dividends and other policies and procedures to protect the government´s equity interest over the 30 year term," reads the template.
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