Few more international than West Seti

Few more international than West Seti
eKantipur.com, 19-May-07
BY BIKASH SANGRAULA

After the end of this year's monsoon, the country's biggest ever infrastructure project, the 750-megawatt West Seti, will begin construction. But more than the size or cost (US $ 1.25 billion), it is the scale of international involvement that makes this project stand out among development ventures undertaken in Nepal.

The project has the involvement of four countries and two international banks in areas including investment, construction, insurance, transmission and consumption.

Australia's Snowy Mountain Engineering Corp (SMEC) took a decade to bring the storage-type project to the construction stage since signing a Project Agreement with the government of Nepal in June 1997 to develop and operate the project for 30 years.

"West Seti is a project that has been subject to particularly rigorous international analysis and review," said Bob Scott, SMEC chairman.

According to SMEC, the project will be owned by Chinese, Australian and Indian investors, apart from the government of Nepal and the Asian Development Bank (ADB).

A statement issued by SMEC after a shareholders' meeting in Kathmandu last week said that 26 percent of equity shares for the project will be owned by SMEC, and 15 percent each by China National and Machinery Import and Export Corporation (CMEC), ADB, the government of Nepal, and India's Infrastructure Leasing and Financial Services (IL&FS). Holders of the remaining 14 percent of shares will be finalized soon.

Similarly, on the debt financing side, China Exim Bank is investing US $ 400 m, IL&FS US $ 300 m, Bank of China US $ 300 m, the Industrial and Commercial Bank of China US $ 200 m, and ADB US $ 50 m, according to SMEC.

Meanwhile, political risk insurance is being sought from ADB, the China Export and Credit Insurance Corporation (Sinosure) and the Multilateral Investment Guarantee Agency (MIGA) of the World Bank. The project will be run by a company registered in Hong Kong.

Apart from ownership of equity shares, CMEC has been awarded the Plan, Design, and Build contract for the project.

Ninety percent of power generated from the project will be traded to India by PTC India Ltd, with which SMEC signed a 25-year Power Purchase Agreement in October 2003. Nepal will get the rest of the generated power as royalty.

According to SMEC, the construction of the project is expected to take 5.5 years, during which time an estimated US $ 225 million will be injected into Nepal's economy.

The project to be constructed in Doti district in Far Western Nepal will displace some 1,650 families from its reservoir area to the terai, while another 350 households within the transmission line area will also be affected, some of them needing relocation to adjacent land.

West Seti is designed to export power to northern India, where the peaking power deficit is estimated at about 12 percent.