Hydropower

Nepal cancels current construction plans for 1,200-MW Budhi Gandaki hydropower project

Plans to build the US$2.5 billion 1,200-MW Budhi Gandaki hydropower in Nepal have been “scrapped,” according to Nepal’s Energy Minister, Kamal Thapa.

Thapa, who is also Nepal’s Deputy Prime minister made the announcement Nov. 13 via a Twitter post linked to the government’s official site. His post conveys information the agreement with China Gezhouba Group Corp. (CGGC) has “irregularities.” As per parliamentary direction from a committee during a cabinet meeting Monday, the project with CGGC has been scrapped.

The committee said the government breached Nepal’s Public Procurement Act, because CGGC was selected without initiating a competitive bidding process.

After signing a memorandum of understanding (MoU) with Nepal in May for the Chinese-led Belt and Road Initiative (BRI), the Chinese government identified the 1,200 MW project as a BRI component.

The World Bank estimates Nepal needs to invest about 3% of GDP annually in order to enhance external connectivity and through the BRI, Nepal expects its infrastructure gap to be better addressed.

There is no immediate word if or when building the project could be re-negotiated with CGGC or another developer. After commissioning, the Budhi Gandaki plant would have been Nepal’s largest capacity project.

Currently, Nepal’s installed hydropower capacity is 753 MW.

In May, HydroWorld.com reported the Nepal government planned to award a contract to CGGC to construct the project.

CGGC was to build the plant under an engineering, procurement, construction and finance model. But, the parties had yet to sign a memorandum of understanding and other regulatory agreements before the award was made official.

In June, the Nepal government awarded the contract to CGGC to build the project. After today’s announcement, the focus could become greater on finishing the ongoing efforts the government is making related to hydropower.

Nepal continues trying to solve issues related to electrifying the country, utilizing money already obtained.

In August, the Dolma Impact Fund invested $3.2 million in equity investment in the 28.1-MW Lower Likhu hydropower project being developed by Swet Ganga Hydropower and Construction Public Ltd.

In June, the Asian Infrastructure Investment Bank (AIIB), assured Nepal it will finance two projects, each costing about $156 million through soft loans, according to the government of Nepal’s Finance Minister, Gyanendra Bahadur Karki.

According to Nepal, it wants AIIB financing for the 87-MW Tamakoshi V hydropower facility to be developed from the tailrace of the 456-MW Upper Tamakoshi hydropower project in Dolakha and a development of the 93-MW Sharada-Babai hydropower project in Salyan and Dang districts.

In February 2016, the World Bank Group signed a loan agreement to provide $22.5 million to Nepal to help implement the country’s Power Sector Reform and Sustainable Hydropower Project.

The initiative’s three primary components include preparing hydroelectric plant and transmission projects, preparing energy sector reform recommendations, and determining practices for hydropower management and development.

According to statistics from China’s Ministry of Commerce, at the end of 2015, Chinese cumulative foreign direct investment (FDI) in Nepal was $291.9 million. The United Nations Conference of Trade and Development reports that in 2016, total FDI in Nepal was $653 million.