NATIONAL 6 -(Spotlight Weekly)]

Private Investment

Giving permission to a US company to develop Arun III project, the government tries to woo foreign investors into the all-important sector

By A CORRESPONDENT

If things go their way, the much-talked about Arun III project will become a reality within a few years time. Minister for Water Resources Khum Bahadur Khadka told the Parliament last week that the government has accepted a private sector proposal for the construction of the Arun-III hydropower project. The 402-MW project will be the biggest of all the hydro power plants in Nepal upon its completion. His deputy, state minister Ram Bahadur Gurung later said the Ministry was in the process of inviting Eurorient, a US-based company, to develop the Arun III hydel project. Officials said they had already sent an invitation letter to the US company to apply for the development license after paying necessary royalty.

A Hydropower plant : Hot issue

Ministry sources said that the government accepted the proposal of the US company after rejecting the proposals of ASTQ Holdings Corporation, a Canadian company and Nepal's Sushashan Power Company. They have, however, not made public the reasons for Choosing the US company out of the three.

The Arun III project was aborted six years ago after the World Bank, which had supported it for nearly 10 years, amid protests from the environmental groups. "We had protested the 201 MW Arun III project then as it was proposed to be constructed under US$ one billion from the World Bank. We don't have any reservation now as it will now be constructed by a private sector developer," said Bikash Pandey, a member of Alliance for Energy Nepal. The Bank had pulled out of the project even after detailed design works and feasibility studies of the project was completed.

In an interview with BBC, managing director of Eurorient Investment Group, Ron Nenchimia, said the group had keen interest to develop Arun III. Reports said Nenchimia was coming to Nepal within a fortnight to apply for the survey license, to work toward setting up the group's Nepal office and sort out Power Purchase Agreement (PPA) with India. The company will have to pay Rs 42 million-at a rate of Rs 100 per kilo watt-as royalty to the government to obtain power development license from the government as per the Electricity Regulation.

More tricky job for the US company will be to enter into PPA with India. The Snowy Mountain Enginnering Company of Australia, that has received permission to develop 750 MW West Seti hydropower project, is yet to enter into any such arrangement with Indian buyers even after two years. But looking at the huge power deficit in India, it can be assumed that India will agree to buy electricity from Nepal, albeit at its own terms.

Meanwhile, the government has awarded permission to foreign investors to develop hydropower projects in Nepal. Minister for Water Resources Khum Bahadur Khadka has recently given permission to foreign investors to develop Arun-III, Budhi Ganga, Likhu-4, Tamor Mewa, Andhi Khola, Dudh Koshi-1 and Kankai hydropower projects. Out of the seven projects, detailed engineering study of the Arun-III project has already been completed whereas feasibility studies have been completed of the other six projects. The private sector now has been allowed to undertake detailed study of these projects. 28 Nepali and foreign companies had submitted a total of 62 proposals to undertake feasibility studies of 11 different projects last year. These include nine companies from Nepal, four companies from India, two companies each from the US, Canada, Australia and France, and one company each from Belgium, China, Norway, Switzerland and Brazil.

Though Nepal boasts of an effective hydropower potential of more than 25,000 MW, she has so far been able to generate only 336 MW of power. With the foreign investors showing interest to develop power in Nepal, the `white gold' may become a reality sooner than later.