KATHMANDU, Oct 20: GMR, Sutlej Jal Vidyut Nigam Ltd (SJVN) and SN Power, three international power producers which are working on three hydropower projects with collective generation capacity of 2400 MW, have opposed the government´s new Project Development Agreement (PDA) template, saying that it does not guarantee policy consistency.
They have also raised concerns over the force majeure clause, arguing that it should be applicable not just in case of natural calamities, as provisioned in the template, but also in case of political instability and bureaucratic hassles.
The Investment Board (IB) had unveiled the template of the PDA in June as its basis for negotiations with international power developers.
However, the three developers said they have strong ´reservations´ about the PDA template. "Its provisions are weak and unacceptable," an informed source quoted the senior officials of the three firms as saying during their meetings with IB officials.
During the meetings, they even asked the IB not to apply the template during their PDA negotiations. "Their argument is: their engagement in the country had begun long before the template was developed, and hence, the template´s provisions should not be imposed on them," stated the source.
Radhesh Pant, IB CEO confirmed the dissatisfaction of GMR, Sutlej and SN Power. "Yes, they have expressed concerns over the PDA template. But we have asked them to submit their concerns in detail and in writing so that we could discuss them officially," Pant told Republica.
However, he denied divulging any further details.
The source, however, said the developers have asked IB to categorically cite a provision warranting consistency of policies.
"The PDA template must assure that income tax and bonus provisions, among other things, would remain the same for us throughout the project period. It must guarantee that in case of any change in the rules, it would not apply to us," the source quoted developers´ representatives as saying during the meeting.
The developers have even asked IB to extend the concession period, which is their span of ownership of the projects to be developed under build-own-operate-and transfer (BOOT), to 35 years from 30 years.
"Thirty years would be inadequate to recover the project cost," the developers have told the IB, according to the source.
So much so, SN Power has even warned that it could withdraw from Nepal if IB did not agree to its ´request´. Sandeep Shah, country director of SN Power, could not be contacted for comments.
SN Power, Norwegian power producer that developed Khimti I (60 MW), is working on the project concept of Tamakoshi III (estimated 600 MW) in cooperation with Indian developer TATA Power.
Sutlej, India´s state-owned power producer, which has got approval from the government to invest Rs 82.5 billion for the development of Arun III (900 MW), too has said that it wouldn´t be able to work under the provisions of the PDA template.
"We have already invested so much in the project. The government can´t impose new provisions on us now," the source quoted Sutlej officials as saying.
GMR, another Indian power developer, is working to develop Upper Karnali (900 MW).
IB entrusted to implement hydropower projects of 500 MW and above, had even invited a three-member team of Herbert Smith, British consultant that drafted the PDA template, to Nepal from London last week to convince the developers that the template is in line with the country´s law and international practices, and hence, is ´bankable´.
However, the source said IB´s effort did not pay off. Officials from GMR and Sutlej could not be reached for comment.
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