Govt silent on security for major projects

The government´s more than half a dozen decisions related to three mega hydropower projects, Upper Karnali (900 MW), Upper Marsyangdi (600 MW) and Arun III (900 MW) are not significantly meaningful to ensure that the projects will be initiated on time, experts claimed.
"The government has failed to address major issue of project security which the developers are long seeking to ensure project development on time," Gyanendra Lal Pradhan, hydropower expert said.
The government on Tuesady decided to allow increase of capital from Rs 450 million to Rs 1.9 billion for GMR Upper Karnali Hydropower Company Limited and Himtal Hydropower Company Limited -- two subsidiaries of Indian infrastructure developer GMR entrusted to develop Upper Karnali and Upper Marsyangdi respectively and to extend their offices in New Delhi, India.
Other decisions included allowing Sutlej Nepal to establish office in India and allow the company to bring another equity shareholder for the project development, extend the survey license of Upper Karnali for another six months, allowing GMR to start land acquisition verification in the project site of Upper Marsyangdi.
Pradhan argued that the government´s decisions were purely procedural and did not guarantee the development of the projects. "There is nothing to be happy from the government´s decisions on Tuesday," he added.
"Government´s decisions give a positive meaning but they are not landmark steps towards ensuring the project development in the country," Krishna Prasad Dulal, another hydro expert and former board member of the Nepal Electricity Authority (NEA) said.
Dulal added that the Nepal Investment Board (NIB) itself is not heading in the right direction. "The NIB had to show a strong gesture to send the message that the government was concerned about the security issues that the developers are raising time and again," Dulal said.
GMR, a leading Indian insfrastructure developer that is engaged in the two mega hydropower projects of Nepal, had formally written to the government seeking security in the project sites after the CPN-Maoist -- a breakaway faction of ruling UCPN (Maoist) -- decided to ´struggle´ against the Indian developers in Nepal.
"The government has skipped a major concern of the developers," an official of the NEA said in condition of anonymity since speaking on those projects doesn´t fall under the jurisdiction of NEA. "At least, the government had to come up with some strategies such as taking locals into confidence and issuing share to the locals in order to protect projects from the anti-project forces," the official opined.
In the meantime, CPN-Maoist has said that the party is totally against the government´s decisions and will soon announce protest programs after completion of the party´s general convention in January. "We are against the projects and will use all forces to protect people´s right and save national resources from Indian encroachment," Pampha Bhusal, spokesperson of the CPN-Maiost told Republica over phone on Wednesday.
Radesh Pant, chief executive officer (CEO) of the NIB said that the NIB board of directors meeting on Tuesday chaired by Prime Minister Babu Ram Bhattarai was silent on security issues of the project. "The meeting was more focused on administrative issues," Pant said.
NIB, a high level government entity to carry out the mega projects, is looking after the hydropower projects above 500 MW including Upper Karnali, Upper Marsyangdi, Arun III and West Seti (750 MW).

Govt clears PDA template for big hydro projects

In a major development, the Investment Board (IB) on Thursday approved a format for power development agreements (PDA) that it is to adopt while awarding hydroelectricity projects of above 500 MW capacity to international investors.

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.

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.