BLOG
April 3rd, 2012
Courtesy of The Wall Street Journal, a report that a parliamentary committee in Nepal has given the go-ahead for China Three Gorges Corp.’s $1.6 billion hydroelectric-power project after the Chinese state-owned company threatened last month to pull the plug on its investment. As the article notes:
“…Lawmakers had raised concerns that Nepal’s government had awarded the contract without opening it up to international bidding, prompting the Chinese company to threaten in a letter to the government in March that it would scrap the project unless things moved forward.
Shanta Chaudhary, head of the parliamentary committee on natural resources, said Monday the committee had decided to approve the project, providing China Three Gorges Corp. meets some criteria, which include routing the investment through the country’s newly formed Nepal Investment Board.
“We have decided that the project should go ahead after due corrections in the agreement between the government and the company,” Ms. Chaudhary said, adding that the committee took the decision in a meeting Sunday.
The committee, in a 24-page report, found “serious legal and administrative errors” in the procedures followed by Nepal’s Energy Ministry while granting a project license to China Three Gorges.
It said the ministry didn’t consult with the finance ministry and other government authorities while taking its decision and deprived the country of maximum benefits that it hoped a competitive bidding process would have brought.
The committee said separate investment proposals by two other Chinese companies, Sinohydro Corp. Ltd. and China Machinery Engineering Corp., who had shown interest in the project weren’t given due consideration by the energy ministry.
The committee cited a recent Nepali legal manual on hydroelectricity to contest the government’s claim that it had power under domestic law to award hydroelectric projects without a bidding process.
The committee, however, said the project should be implemented nonetheless given Nepal’s energy needs and a desire for good relations with China. The committee directed the government to ensure the similar “procedural and legal mistakes” aren’t repeated in the future.
It also advised the government to negotiate so that Nepal’s state power utility gets 25% in the project, local residents of the project area 10% and domestic industrialists and other residents 14%.
On Feb. 29, China Three Gorges and Nepal’s Ministry of Energy signed an agreement for the project on the Seti River in northwestern Nepal. Nepal’s state power utility would hold 25% and the Chinese company the rest. The two sides have agreed to complete the project by December 2019. Nepal is hoping to tap huge hydroelectric potential from its fast-flowing Himalayan river system and the 750-megawatt hydroelectric dam and power project is key to these ambitions. The development is one of a suite of overseas infrastructure projects that China’s state-owned companies are undertaking.
China is building infrastructure projects, from dams to ports, in neighboring countries and further afield. But the country also has faced setbacks, including Myanmar’s decision last year to cancel a $3.6 billion hydroelectric dam, citing environmental concerns. The Chinese state-owned company involved in that project said last month it still hopes to proceed.
The delays over the project in Nepal come amid a tussle between political groups in the country’s Constituent Assembly, which is the nation’s parliament. The country emerged from a 10-year civil war in 2006 but debates continue to rage over issues such as what form of government the country should follow.
The coalition government, which is led by a party of former Maoist rebels, argued it was allowed under the country’s water-resources law to award major dam construction contracts without a bidding process. Some 40% of Nepalis don’t have access to electricity and the government is keen to quickly exploit the nation’s hydropower possibilities.
After the parliament raised concerns, China Three Gorges last month wrote a letter to the Nepalese government threatening to pull out unless it cleared the project.
Arjun Kumar Karki, joint secretary in the policy and foreign-coordination section of Nepal’s Ministry of Energy, said the government is yet to receive the decision and recommendations of the committee. “The government will decide how to proceed after going through the recommendations,” Mr. Karki said.
China Three Gorges couldn’t be reached immediately for comment but the company has said in the past that it is up to Nepal’s government to decide whether to push ahead with the dam.
Nepal not only hopes to meet its own power shortages through such deals but also to sell surplus energy to its neighbors, India and China.
