Two Indian partners join GMR in the 900 MW Upper Karnali hydroelectric project
- In Reports
- 06:07 PM, Sep 14, 2024
- Myind Staff
In a major development, the Indian conglomerate GMR said that groundwork for its financial closure has started in association with two Indian public-sector undertakings. The Indian conglomerate is the developer of the Rs146 billion Upper Karnali hydropower project. The project, planned since 2006, is being developed by GMR Upper Karnali Hydro Power Limited Nepal, a subsidiary of GMR Energy Limited, which will make provision for 900 MW power generation on the Karnali River in the Achham and Dailekh districts.
To collaboratively develop the project through the Joint Venture (JV) company in Nepal, GMR Upper Karnali Hydro Power Limited Nepal, SJVNL, an Indian public sector undertaking in the Navratna Category engaged in the generation and transmission of hydroelectric power, and Indian Renewable Energy Development Agency Ltd. (IREDA) has signed a memorandum of understanding with the former.
The SJVNL and GMR will each own 34% of the shares in the planned JV, while IREDA will own 5%, according to sources in the Indian media. The Nepal Electricity Authority will hold a 27% stake. The collaboration with the two public sector undertakings will provide significant advantages to the project, remarked Sanjay Barde, CEO-Energy, GMR. “Financial institutions will have increased confidence in extending debt, and power evacuation will be facilitated through India via two cross-border transmission lines.”
Around 108MW out of the total power generated from the project will be allocated to Nepal whilst 500MW will be sold to Bangladesh under a long-term supply agreement with a dollar-denominated tariff. The remaining 292MW will be available for sale in India.
“The project's development, operation, and power sale involving three countries for over 25 years will strengthen long-term relations between them,” as per the statement issued by the GMR on Thursday. The statement concluded, "The trilateral project involving India, Nepal, and Bangladesh exemplifies regional economic cooperation and enhances regional power security. It has the potential to accelerate Nepal's hydropower development significantly.”
After commissioning, the project will be developed on a build, own, operate, and transfer (BOOT) framework with a 25-year commissioning period. It is suggested to be financed using debt to equity at a ratio of 70:30. “Following Nepal’s Supreme Court decision in favour of the government of Nepal, we have been actively addressing all issues related to cross-border transmission lines between Nepal and India, as well as Bangladesh and India," said Barde.
A memorandum of agreement was signed by the government and the GMR on January 24, 2008, for the project's survey and construction. The GMR submitted an application to the Department of Electricity Development on December 20, 2009, requesting a capacity increase from 300 MW to 900 MW.
The Project Development Agreement (PDA), which gave the Indian business two years to complete financial closure (raising resources to construct the project), was signed on September 19, 2014, by the Investment Board and the GMR. The deadline was extended on January 8, 2017, by an additional year. The Investment Board extended the deadline by an additional year on November 10, 2017.
On July 15, 2022, the government last extended the project's financial closure deadline by two years. A government task force's recommendation served as the foundation for the extension. A writ opposing the government's judgment was then filed at the Supreme Court.
The Supreme Court issued an order on November 3, 2022, to temporarily halt the implementation of the deadline extension.
Eventually, on May 7, 2023, the constitutional bench of the Supreme Court gave GMR permission to carry out the project. To make up for the time lost because of the temporary order, the government gave GMR an extra 186 days in accordance with the court's order. But no further extensions were mandated by the court. According to GMR, in order to finance the project, which calls for a significant cash outlay, it has been pursuing debt from financial institutions. As the GMR was making headway in these areas, SJVNL, which already had projects underway in Nepal, indicated interest in purchasing an ownership position.
“GMR welcomed the proposal, and SJVNL sought permission from India’s ministry of power to form the JV with a private undertaking,” said Barde. “After due diligence by SJVNL, the ministry of power, and other relevant government agencies, a letter of approval was issued.” Additionally, IREDA, a leading renewable energy financing agency in India, decided to join with a minority stake of 5 percent, he said.
With a combined capacity of 2,274 MW, SJVN is building three hydroelectric projects in the Arun River basin: the 695 MW Arun-IV, the 679 MW Lower Arun, and the 900 MW export-oriented Arun III.
Image source: The Kathmandu Post
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