China's Three Gorges withdraws from US$1.2b hydropower project in Nepal

Talks between the parties fell apart.

The government of Nepal and China Three Gorges International Corporation (CTGI) ended talks for the West Seti hydropower project, with both sides failing to find a middle ground.

According to a report by The Himalayan Times, CTGI cited the project's low rate of return and said it would respect the decision of the next board meeting of the Investment Board of Nepal (IBN).

“Despite capacity optimisation and dollar-denominated power purchase agreement, the project is still financially unfeasible because of resettlement and other technical issues,” an IBN official quoted CTGI members as saying.

As per CTGI, the return on equity of the project will hover around 12.5%, and hydel projects can be considered feasible only when RoE is not less than 17%, IBN officials said.

Previously, IBN had agreed to bring down the installed capacity of the project from 750MW to 600MW.

The West Seti project is located in the far western region of the country. BN and CTGI had inked a memorandum of understanding to develop West Seti hydroelectric project in February 2012.

This is not the first time Chinese investment has been withdrawn from Nepal. The government terminated a licence awarded to China’s Gezhouba Group in late 2017 to build a 1.2GW hydropower plant, which would have been the country’s largest, due to supposed lapses in the awarding process.

“The hydropower dams are a major part of Nepal’s 10-year plan to develop 10 GW of power. Nepali officials have long hoped to secure investment from China to exploit its rich hydropower resources and ease the country’s chronic energy shortages,” said Abhaya Raj Joshi from the London-based non-profit Chinadialogue in late June.