A top Norweigan renewable energy developer has decided to pull out from a 650 MW power plant project in Nepal citing the fragile political situation in the country and the lack of power sector reforms.
Statkraft decided withdraw from Nepal after conducting a thorough assessment of all aspects of the project, including commercial, technical and regulatory factors, the company said in a statement.
"These factors include a lack of viable power offtake option, lower electricity price forecasts, insufficient transmission capacity for power evacuation and absence of necessary policies and regulatory framework for operationalising power sales," the statement said.
The Tamakoshi - 3 hydropower project, which was to produce 650 MW electricity, has been discontinued due to the fragile political situation in the country.
"The fragile political situation in Nepal, the strained Indo-Nepal relations in the wake of the four-month long border blocade and lack of power sector reforms are also reasons for this decision," said Sandip Shah, Vice president and Country Director, Nepal for Statkraft.
"It also reflects the increased bureaucratic hurdles for foreign investments, a fragile political situation and a geo-political situation leading to a non-conducive project development environment," Shah said.
The company has already notified Investment Board of Nepal regarding its decision to discontinue the development of the project.
"Statkraft is still interested in further developments in Nepal, but projects need to demonstrate attractive returns on investment and stable long-term conditions in which to operate," Shah said.
The company has already spent USD 11 million in the feasibility study of the project, which is expected to cost USD 1.5 billion.
"As majority owner of Himal Power Ltd (HPL), Statkraft has a long-term commitment to Nepal as the license agreement for the 60 MW Khimti hydropower plant runs until 2045, said Tima Utne Iyer, Senior Vice president at Statkraft.
"Our decision is purely linked to the Tamakoshi-3 Project and does not influence our activities in South Asia," she added.
Nepal has high demand for electricity during winter and the country's power projects are producing less electricity during the period due to low water level in the river. Nepal currently produces around 780 MW electricity though the domestic demand stands at 1,300 MW during peak period.
The country is currently facing daily 14-hour load- shedding in its major cities.
Nepal is also facing acute shortage of energy in the wake of the blockade of the Indo-Nepal border by Madhesis, largely of Indian-origin. Many people in the urban areas are relying on electricity due to the shortage of cooking gas.