Nepal scraps mega hydropower deal with Chinese firm

Kathmandu, Nepal | AFP – 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 have doubled Nepal’s current hydropower production and cost an estimated $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 .

"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 Chinese state-owned China Gezhouba Group Corporation (CGGC) in June to build the long-mooted 1,200 megawatt Budhi-Gandaki hydroelectric plant.

The deal followed Nepal’s decision to sign up to China’s ambitious One Belt, One Road Initiative (OBOR), a massive infrastructure drive at the centre of the Asian giant’s push to expand its global influence.

China’s creeping influence in Nepal has been closely watched by India, which has traditionally played the role of big brother to its small Himalayan neighbour.

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, told AFP.

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 neighbouring 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.

Crucial infrastructure development has flagged in the years of political paralysis that followed the end of the Maoist insurgency in 2006 and the overthrow of the monarchy two years later.

CGGC is currently building three smaller hydropower plants in Nepal and has completed another one, though critics have complained that the projects have consistently run over time and over budget.

Nepal’s government is also currently building a 750 megawatt plant with China’s backing.

Meanwhile, construction of two large India-backed projects — each with a price tag of over $1 billion — is expected to begin next year after years of delays.

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