PTC India’s mega deal to buy Nepal power grounded
January 25th, 2011 - 3:02 pm ICT by IANSBy Sudeshna Sarkar
Kathmandu, Jan 25 (IANS) An initial power purchase agreement signed almost seven years ago between PTC India Ltd, a leading provider of power trading solutions in India, and Nepal’s biggest hydropower project in the private sector has been grounded, due to the protracted turmoil in the country.The 750 MW West Seti hydropower project, being developed by Snowy Mountain Energy Corporation (SMEC), is in deep doldrums after its licence period ended in December without actual work being undertaken even almost 14 years after the government of Nepal awarded the project to the Australian company.
Soon after the signing of the agreement for the power project in western Nepal, the country was overrun by a Maoist insurgency and till 2006, the subsequent violence and abrupt changes in the government prevented the developers from beginning work.
Even though the armed insurrection ended in 2006, local groups, many of them spearheaded by the Maoists, have been opposing power projects, especially those awarded to foreign investors, leading to inordinate delay and steep escalation in project costs.
Though after the peace accord, SMEC was able to rope in potential investors like the Asian Development Bank, Chinese banks and India’s Infrastructure Leasing and Financial Services, which agreed to acquire 15 percent stake, the promises of funding, however, started ebbing as the opposition to the project continued, sometimes even taking the form of attacks on the company’s offices in Nepal.
While PTC India was initially supposed to buy the total quantum of energy produced, growing local opposition - coming at a time when Nepal is suffering a 12-hour power cut daily - has grounded the agreement.
Now, as the Australian company nervously awaits for Nepal to renew its licence for one year more, there is speculation that Nepal’s energy authorities might seek to buy the power for domestic use.
The plight of West Seti is being watched closely by international investors, including those from India, and if the licence is not renewed or the project fails to take off, it is going to deter companies from investing in Nepal.
(Sudeshna Sarkar can be contacted at sudeshna.s@ians.in)
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Tags: abrupt changes, asian development bank, chinese banks, doldrums, energy authorities, energy corporation, foreign investors, government of nepal, hydropower project, india ltd, initial power, licence period, maoist, maoists, peace accord, power projects, smec, snowy mountain, trading solutions, western nepal