NIB forms PDA talks team for big hydro projects

The secretariat of the Nepal Investment Board (NIB), a high-level government entity, has formed a project development agreement (PDA) negotiation team and is planning to seek approval for it from the NIB board of directors.
The NIB secretariat has formed a six-member team comprising representatives from NIB and the Ministries of Finance (MoF), Energy (MoE) and Forests and Soil Conversation (MoFSC), according to a member of the team.
"The team should be approved by the board. The NIB secretariat will forward a proposal to the board for that purpose," the member said on condition of anonymity.
According to the source, NIB has selected Radesh Pant, chief executive officer at NIB; Mukunda Poudel, joint-secretary at NIB, and Baikuntha Aryal, joint-secretary at MoF, as well as another joint-secretary at MoF, two joint-secretaries at MoE and a joint-secretary at MoFSC as members of the PDA negotiation team.
NIB, which is currently working to take forward the development of four mega hydropower projects, formed the team on the basis of a mandate it received from the government a couple of months ago.
The projects currently on hand include the 900 MW Arun III, 650 MW Tamakoshi III, 900 MW Upper Karnali and 600 MW Upper Marsyangdi.
"The team will start PDA negotiations with the developers of those four mega projects after it is approved by the board of directors meeting scheduled within the next couple of weeks. Sutlej Jal Vidyut Nigam is lined up for the development of Arun III, GMR for Upper Karnali and Upper Marsyangdi and SN Power for Tamakoshi III. Sutlej and GMR and Indian companies whereas SN Power is Norwegian.
The PDA negotiations, one of the crucial stages in project development, are yet to be held with all the developers. According to officials, the PDA template -- a baseline document for such negotiations -- is also yet to be finalized.
However, Pant said that the board of directors has already approved the PDA template.
NIB is developing the PDA template with the technical and legal support of Herbert Smith, a legal consultancy firm based in London.
"The PDA template is a basic requirement in sitting for negotiations with developers," an official at the Office of Prime Minister and Council of Ministers told Republica. "The finalization of the PDA template is even more important at this moment."

Govt unlikely to meet pay demands of Janakpur Cigarette workers

The government may not fulfill all the demands of employees of Janakpur Cigarette Factory on golden handshake, a team that recently conducted a study on the state-owned enterprise´s status has indicated.
"The government is positive about demands placed by workers but it may not be able to fulfill all of them," an official at the Ministry of Finance (MoF) told Republica. "The government will sit again with workers--who are anticipating early launch of the voluntary retirement scheme--to settle the issue.”
According to the official, it will cost the government around Rs 2.6 billion to provide severance package to employees who want to voluntarily retire from their jobs. This amount is higher than Rs 1.26 billion derived by the government based on existing rules.
The MoF had earlier formed a team to assess economic viability, liabilities and assets of the company after workers started putting pressure on the government to relieve them from work at the factory which has remained closed for two years.
The team that comprised representatives of trade unions at the company had valued the company´s assets at around Rs 10 billion. "The total outstanding liability of the company stands at around Rs 2.3 billion," said Hari Sharan Pudasaini, an MoF under secretary, who is also the coordinator of the team.
Employees at the factory had voluntarily asked the government to relieve them from work last December and pay them as soon as possible. The workers had first placed the request at the Ministry of Industry (MoI), which later forwarded it to the MoF.
According to Arjun Chaulagai, one of the workers at the company, Finance Minister Shankar Prasad Koirala has also expressed verbal commitment to settle the issue as soon as . "I will immediately take a look at the report prepared by the committee and try to settle it," Chaulagai quoted the finance minister as saying.
The company that was established in 1965 with the support of the Russian government used to make famous brands of cigarettes like Yak, Gaida and Deurali.
However, with the entry of Surya Tobacco, its near monopoly in the tobacco market ended and it started incurring losses. By the end of 2010/11, the company had accumulated cumulative loss of Rs 170.80 million.
The company has cited use of obsolete machines for its collapse. But in addition to that unnecessary political intervention in operation of the factory, interference in appointment of the factory´s chief and overstaffing have also led to the failure of the company.

With no template, Upper Trishuli-I PDA talks stall

The government has not been able to sit for project development agreement (PDA) negotiations -- a crucial part of a project development process -- with the developer of 216 megawatt Upper Trishuli-I, as it lacks a proper PDA template, the baseline for such negotiations.
The Ministry of Energy (MoE), the entity that is supposed to hold PDA negotiations with hydropower project developers (below 500 MW capacity) has said it could not sit for PDA talks with the developer of Upper Trishuli-I as it didn´t receive the PDA template from Nepal Investment Board (NIB) on time.
"We have not received a proper PDA template from NIB so far," an official at MoE said, preferring anonymity, as he was not authorized to talk to media. "We have received one template from NIB but it is exactly the same thing that we had forwarded to them after NIB came into existence one and half years ago."
Nepal Water and Energy Development Company Private Limited (NWEDC), the developer of the project, has already paid US$ 324,000 as processing fee for PDA negotiations. "We are waiting for PDA negotiations to happen in the near future," a top official from the company told Republica on Thursday.
"We will sit for PDA talks with NWEDC as soon as we receive a complete PDA template from NIB," the official from the ministry said, adding that MoE should use a PDA template developed by NIB as the government has decided to apply a uniform template for all hydropower projects.
NIB had said it was developing the PDA template with technical and legal support from Herbert Smith, a legal advisory firm based in London.
However, Radesh Pant, chief executive officer of NIB, has denied what MoE officials said. "We sent them the PDA template approved by the NIB board of directors," Pant said in reply to a question from Republica on Thursday evening.
The company, which is 50 percent owned by Korea South-East Power Company (KOSEP), has been seeking early PDA talks as it targets to initiate construction of the project within 2013.
According to company officials, the company has already completed the detailed project report and received approval from the government for its environmental impact assessment report.
Apart from KOSEP, 15 percent shares of the company are currently owned by Daelim, 10 percent by Kyeryong Construction and the remaining 25 percent by Bikesh Pradhanang.
Meanwhile, a source close to the company disclosed that the International Finance Company, one of the World Bank group, has bought 15 percent of the shares from Pradhanang. "But 15 shares from Pradhanang have not been transferred to IFC so far," the source added.

Hydropower development top agenda at FNCCI AGM

Hydropower development will be the main agenda in the 47th annual general meeting (AGM) to be held on Wednesday.
“Our priority at this moment is ´hydropower development´. We are taking it forward through our upcoming AGM,” Suraj Vaidya, president of FNCCI, said. "During the AGM, we will seek commitment from the political parties on hydropower development.”
He also informed that FNCCI has developed a hydropower development strategy document which will be unveiled during the AGM. Vaidya, however, didn´t divulge details of the document.
"We have invited most of the political parties to our AGM. This is the first time we are seeking political commitment on a particular issue," Vaidya added. We can´t be specific and ask political leaders to take forward a particular project. But we want some large scale hydropower projects to be developed in the country at any cost."
Bhawani Rana, vice president of FNCCI, said Pushpa Kamal Dahal, chairman of UCPN (Maoist); Sushil Koirala, president of Nepali Congress; Jhalanath Khanal, president of CPN (UML); Bijaya Gachchhadar, president of Madhesi People´s Rights Forum - Democratic; Surya Bahadur Thapa, president of Rastriya Janashakti Party; and Mahantha Thakur, president of Terai Madhes Democratic Party, among other leaders will sign the document.
Vaidya said experts from power developers having interest in Nepal are also attending the AGM.
Dr Lu Guojun, assistant president of China Three Gorges Corporation; Jean Michael, chief hydro expert from the World Bank; Richard Taylor, executive director of International Hydropower Association; and Chanththaboun Souk-Aloune, deputy director of Department of Energy Business of Laos are attending the event, according to Vaidya.
The AGM will also see participation of Harvinder Manocha, vice president of GMR Enegry; Yongping Zhai, director of South Asia Energy Division of Asian Development Bank; and Raghuveer Y Sharma, chief investment officer of International Finance Corporation (IFC).

Hydel seeks conditional generation license

Ambeshwar Engineering Hydropower Private Limited (AEHPL) has sought conditional license to begin construction works for 180 megawatts Kaligandaki Koban hydropower project, though the company has yet to get an environment impact assessment approval from the government.
"The company has written a letter to the Ministry of Energy (MoE) seeking conditional generation license for the project," an official at the ministry said preferring anonymity.
The AEHPL, a joint venture of ESSAR Power Limited, an Indian company registered in Nepal, has requested government to issue conditional generation license so that it could begin construction in near future. "However, the company has not said when it will start the construction of the project," the official said.
The government has not made any decision so far on issuing license to the project. "It is yet to be discussed among the concerned divisions and departments," the official said. Normally, the government does not issue generation license to projects that have not received EIA approval.
However, the government has provided generation license to 400 MW Lower Arun Hydropower Project. The project based in Mustang, a mountainous district in the north, has not yet signed a power purchase agreement (PPA) with the Nepal Electricity Authority (NEA), the sole state-owned hydropower sector regulatory entity. The project that is estimated to cost around Rs 40 billion has been successful to attract attention of private as well as development agencies eager to invest.
The company has completed the detailed project report (DPR). "The company has asked for a conditional generation license but has not demonstrated its financial closure so far," the official informed.
Meanwhile, independent power producers have urged the government to waive off value added tax on civil construction of hydropower projects. They also have half a dozen other demands.
A delegation of the Independent Power Producers´ Association Nepal (IPPAN) had met Shankar Prasad Koirala, the minister for finance and industry, on Wednesday and made an appeal for host of changes to the existing policies.
According to the memorandum the IPPAN officials submitted to Koirala, power producers have asked government to rethink about the Nepal Rastra Bank´s refinancing policy, implement the PPA rate that the government has endorsed for hydropower projects that will be completed by April 2015 and develop an efficient mechanism for coordination among the concerned agencies for project development.
"The refinancing policy of the NRB should be changed," reads the memorandum. "It should be for the entire period of project development or it should be automatically renewed each year during the project development period." As of now, the NRB refinances only for six months.

Can Trade Reduce Poverty in Africa?

In this paper, author Goff and Singh discuss on whether the trade can help to reduce poverty in Africa. While most economists accept that, in the long run, open economies fare better in aggregate than closed ones, many fear that trade could harm the poor. African countries, for example, have realized significant improvements in trade liberalization in recent decades, yet Africa remains the poorest continent in the world. It seems that the large gains expected from  opening up to international economic forces have been limited in Africa, especially for poor people.

Drawing on the findings of a recently published working paper (Le Goff and Singh 2013), this note argues that the benefits of trade are not automatic, but rather depend on accompanying policies aimed at developing the financial sector, promoting primary education, and improving governance. This accompanying policy agenda allows people to take advantage of the opportunities offered by freer trade, by reallocating resources away from less productive activities to more promising ones. Trade liberalization therefore should not be implemented on its own, but with the necessary complementing policies.

Interest rate liberalization in China

In this paper, author/editor Feyzioglu, Tarhan, Porter, Nathan, Takáts and Elöd present What might interest rate liberalization do to intermediation and the cost of capital in China? China’s most binding interest rate control is a ceiling on the deposit rate, although lending rates are also regulated. Through case studies and model-based simulations, the paper finds that liberalization will likely result in higher interest rates, discourage marginal investment, improve the effectiveness of intermediation and monetary transmission, and enhance the financial access of underserved sectors. This can occur without any major disruption. International experience suggests, however, that achieving these benefits without unnecessary instability, requires vigilant supervision, governance, and monetary policy, and a flexible policy toolkit.