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Nepal scraps mega power deal with Chinese firm
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Nepal has cancelled an agreement with a Chinese company to build the largest hydroelectric plant in the impoverished landlocked country, which suffers from chronic energy shortages.
The project, agreed in June, would have nearly doubled Nepal’s current hydropower production and cost an estimated US$2.5 billion.
But the finance ministry recommended it be scrapped, saying it had been awarded without an open and transparent bidding process, according to letters seen by AFP yesterday.
“The cabinet has terminated the irregular and impulsive Budhi Gandaki hydro electric project agreement with Gezhouba Group,” Deputy Prime Minister Kamal Thapa tweeted Monday following a cabinet meeting.
The government signed an agreement with the China Gezhouba Group Corporation in June to build the long-mooted 1,200 megawatt Budhi-Gandaki hydroelectric plant.
A Nepal representative for CGGC said they were surprised by the government’s decision.
“We had done quite a lot of work for the project... such decision is bound to alarm not just us but any investor. There is fear among other foreign companies as well,” Om Bandhu Karki, public relations manager for CGGC in Nepal, said.
Water-rich Nepal has a mountain river system that could make it an energy-producing powerhouse, but instead it imports much of its electricity from neighboring India.
Experts say it could be generating 83,000 megawatts, but its total installed generation capacity currently stands at less than two percent of that.
Demand for electricity has long outstripped supply in Nepal due to chronic under-investment and inefficiencies in the power network.
The result has been crippling for domestic industry and deterred foreign investment.
CGGC is currently building three smaller hydropower plants in Nepal and has completed another one.
Nepal’s government is also currently building a 750 megawatt plant.
Meanwhile, construction of two India-backed projects is expected to begin next year after years of delays.
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