China mulls exit from Nepal's Seti hydropower project

Citing high resettlement and rehabilitation costs, China is planning to make an exit from 750-megawatt West Seti hydropower project in Nepal, reported the South China Morning Post quoting sources in Kathmandu.

A high-level delegation from CWE Investment Corporation, a subsidiary of China Three Gorges Corporation that had undertaken to execute the project in a memorandum of understanding (MoU) in 2012, told the Nepalese authorities that it has now found the project "financially unfeasible".

A Nepal Investment Board official, on condition of anonymity told the South China Morning Post that the MoU and a subsequent agreement with the Nepal Electricity Authority would now have to be cancelled.

In an attempt to save the contract, senior Nepali officials including Finance Minister Yubaraj Khatiwada and Energy Minister Barshaman Pun offered to reduce the generation capacity to 600 megawatt from the proposed 750 megawatt for the same contract award of USD 1.2 billion. They also suggested to extend the power purchase agreement to 12 years from the 10 years earlier agreed upon.

"However, the Three Gorges team said that while Nepal's new offer would address some of their concerns, the resettlement and rehabilitation of the displaced, and arranging power transmission to Kathmandu from the remotely located project would be technically difficult and financially expensive," said the investment board official. "The Chinese were reluctant to review their stance," the official added.

The signing of the MoU in 2012 was then seen as the beginning of a partnership between Nepal and China in harnessing Nepal's rich hydro sources. China had entered Nepal's hydropower market a year after Australia's Snowy Mountain company failed to raise enough funds for it, the South China Morning Post reported.

The Chinese and Nepali sides have been at loggerheads over West Seti for some time. On May 29, Kathmandu in its annual budget for the next financial year 2018-19, said that the West Seti project would be developed with "domestic resources". China's state-run Xinhua news agency had said that this would lead to "widespread concerns about possible negative impact on Chinese investment".