Nepal revives $2.5 bn hydro power project deal with China

Prime Minister KP Oli's government in Nepal last week announced plans to hand over the Budhi Gandaki Hydropower Project to the China Gezhouba Group Corporation, after playing the China card against India for some time.

Nepal’s pro-China government decided to revive a deal with a Chinese state-owned firm to construct a $2.5 billion hydroelectric plant, reversing a decision by the previous government to scrap the award.
The former government of Sher Bahadur Deuba had taken a decision to develop the 1200 MW project with internal resources, rather than seeking investment from other countries.
A Nepal cabinet meeting on Friday also directed the energy ministry to initiate the process to award the project to the Chinese developer. 
Accordingly, the ministry will hold talks with the Gezhouba, prepare a proposal, and strike a deal to execute the $2.5 billion reservoir project, the Kathmandu Post reported.
The energy ministry will also invite the Chinese company for talks and prepare a draft of the memorandum of understanding (MoU) before signing it, according to sources at the ministry.
"The understanding will be signed to execute the project under the engineering, procurement, construction and financing (EPCF) model," said one senior official.
This is not the first time that the government has roped in the Chinese developer to develop the Budhi Gandaki project. The Pushpa Kamal Dahal-led government had, in May 2017, also signed an MoU with the CGGC to execute the project under the EPCF model.
The agreement invited controversy as the project was handed to the Chinese company without initiating a competitive bidding process.
The Deuba administration scrapped the deal in November last year citing irregularities.  
The government had also announced plans to build the project using domestic financial resources via the state-owned Nepal Electricity Authority. A committee was also formed to explore financing options to build the power plant.
The committee had suggested that the government develop the project on its own by providing viability gap funding, covering around one-third of the project's development cost. The government had approved the proposal and had agreed to provide the gap funding.
But the plan never materialised as the government changed before the decision could be implemented.