Government could award the project to controversial CGGC
Sujata Awale
Kathmandu
The Prime Minister’s Office is inclined to award the Budhi Gandaki Hydroelectric Project to China Gezhouba Group Corporation ( CGGC), following Prime Minister K P Oli’s visit to China in March. According to a source in the Ministry of Energy ( MoE), despite a proposal earlier submitted to MoE by Power China International Group to develop the Budhi Gandaki Hydropower Project, under directions from the PMO, MoE has initiated the process to provide the project to CGGC. CGGC does not appear to have a clean record and has been in controversy.According to a document with The Himalayan Times from the source, the ministry received the letter of interest from Power China on March 22 and a preliminary proposal on May 19. According to the source, however, ignoring this proposal, MoE preceded to the proposal from CGGC that was submitted on July 12.
Like CGGC, Power China had also shown interest to develop Nepal’s national pride project via the EPCF ( Engineering, Procurement and Construction with Finance) modality. In this modality, the company will be responsible for developing technical, engineering, civil works and arranging finance.
“ As per directions from the PMO, we are in the process of studying the proposal from CGGC,” said Dinesh Kumar Ghimire, Spokesperson and Joint Secretary at MoE. Citing that it is just a mere process of investigation, he said, “ We have asked the Ministry of Finance to write to the Chinese Embassy for a report on CGGC. It is not like the MoE will award the project to the CGGC.” Ghimire informed that the process was conducted according to provision mentioned in the concept paper of ‘ National Energy Crisis Mitigation and Electricity Development Decade 2072’ which says the government may give projects on contract to develop storage kind of project under the EPCF model.
Questions raised
When asked whether MoE received any other proposals from other companies beside CGGC, the ministry said that there was no other proposal. This statement from the ministry raises questions about why the government did not mention the proposal from Power China which was submitted four months ago? Why is the ministry showing keen interest in CGGC despite it facing allegations of tax evasion through fake invoices, not completing projects on time and even being blacklisted for earlier projects in Nepal?
“After a government to government meeting, MoE initiated the process of endorsing our company through the government of China to find out about our capability, financial background and other aspects,” said Om Bandhu Karki, PR Manager at CGGC. Karki further said, “ As the country is reeling under acute power shortage, CGGC came up with a proposal where it agrees to implement the project on the estimated construction cost with nominal margin.” He informed that if the government does not endorse EPCF model to develop the Budhi Gandaki Project, it will take at least five to seven years to initiate construction of the project.
“ Owned by the Chinese government, access to finance, support from the Chinese government and same kind of offshore experience makes CGGC a competent company to develop this mega project,” claimed Karki, adding that they had sent an attractive proposal to the government.
“ Owned by the Chinese government, access to finance, support from the Chinese government and same kind of offshore experience makes CGGC a competent company to develop this mega project,” claimed Karki, adding that they had sent an attractive proposal to the government.
Budhi Gandaki, Nepal’s National Pride
The government has completed the Detail Engineering Survey of Budhi Gandaki Project by French consultant Tractebel Engineering.
Estimated construction cost of the project is USD 2.5 billion. This storage type 1,200 MW mega project is located 80 km west of Kathmandu and it will have the largest storage volume of 446 million cubic metre in the country.
It is estimated that this project will produce annual energy of 3,384 Gwh. The project will generate 1,408 Gwh of electricity in the dry season and 1,975 Gwh in the wet season which will significantly help to reduce power cuts in the country.
Estimated construction cost of the project is USD 2.5 billion. This storage type 1,200 MW mega project is located 80 km west of Kathmandu and it will have the largest storage volume of 446 million cubic metre in the country.
It is estimated that this project will produce annual energy of 3,384 Gwh. The project will generate 1,408 Gwh of electricity in the dry season and 1,975 Gwh in the wet season which will significantly help to reduce power cuts in the country.
Track record of CGGC
CGGC company is not a new name in the hydropower sector in Nepal. It was awarded the 30 MW Chameliya Project in 2006. A decade has passed but CGGC could not complete the 30 MW Chameliya Project. Estimated to be completed at Rs 2.88 billion, the company has already received Rs six billion till date for the work however the project is still in limbo. According to the Large Taxpayers Office at Lalitpur, CGGC has submitted duplicate bills totaling Rs one billion for the project. The Inland Revenue Department has issued a letter to the company on July 15 for paying Rs 1.16 billion.
CGGC was awarded the 60 MW Upper Trishuli 3A in EPC ( Engineering, Procurement and Construction) model with the initial agreement at USD 89.1 million. The company could not complete the project despite NEA extending the deadline many times. The last deadline to complete the project was on June 30, however it is yet to be completed. Issue to augment the project from 60 MW to 90 MW was major reason for delays. Though the project cost has swelled, and the company has already received Rs 10 billion for construction, the project is yet to be completed.
“ It is not fair to only blame contractors for the delay in project completion,” said Karki, when asked about these issues, adding, “ Delay in land acquisition, local obstruction, lack of proper feasibility study, land acquisition and right of issue, geological and technical hazard and delayed government decisions are hassles we faced for not meeting deadlines.” He further said, “ Due to tunnel squeezing in Chameliya Project, we could not move the project ahead.” According to him, they have completed 97 per cent of the work on that project.
Talking about the Upper Trishuli 3A, Karki said, “ We asked the government to reconstruct the access road to the project site as last year’s earthquake totally damaged the roads. Due to the slow pace of work by the government, construction work at the project is totally halted leading us not meeting the deadline again.” Furthermore, CGGC was blacklisted by Chilime Hydropower Company for three years in 2013 for no procurement for the civil works of 42.5 MW Sanjen Hydroelectric Project.
As per the press release of the World Bank ( WB) published on May 29, 2015, it debarred four subsidiaries of CGGC in connection with misconduct involving three WB funded projects in China. It debarred Gezhouba No 1 Engineering Co Ltd, Gezhouba No 5 Engineering Co Ltd, Gezhouba No 6 Engineering Co Ltd and their affiliates for a period of 18 months whereas China Gezhouba Three Gorges Engineering Co Ltd and its affiliates debarred for a period of six months. The mother company CGGC also received a letter of reprimand which is valid for six months.
The fact remains that many red signals have been raised in the way interest is being shown by the government to award the Budhi Gandaki project to CGGC. Perhaps more transparency and checks and balances are required before the project is awarded.
CGGC was awarded the 60 MW Upper Trishuli 3A in EPC ( Engineering, Procurement and Construction) model with the initial agreement at USD 89.1 million. The company could not complete the project despite NEA extending the deadline many times. The last deadline to complete the project was on June 30, however it is yet to be completed. Issue to augment the project from 60 MW to 90 MW was major reason for delays. Though the project cost has swelled, and the company has already received Rs 10 billion for construction, the project is yet to be completed.
“ It is not fair to only blame contractors for the delay in project completion,” said Karki, when asked about these issues, adding, “ Delay in land acquisition, local obstruction, lack of proper feasibility study, land acquisition and right of issue, geological and technical hazard and delayed government decisions are hassles we faced for not meeting deadlines.” He further said, “ Due to tunnel squeezing in Chameliya Project, we could not move the project ahead.” According to him, they have completed 97 per cent of the work on that project.
Talking about the Upper Trishuli 3A, Karki said, “ We asked the government to reconstruct the access road to the project site as last year’s earthquake totally damaged the roads. Due to the slow pace of work by the government, construction work at the project is totally halted leading us not meeting the deadline again.” Furthermore, CGGC was blacklisted by Chilime Hydropower Company for three years in 2013 for no procurement for the civil works of 42.5 MW Sanjen Hydroelectric Project.
As per the press release of the World Bank ( WB) published on May 29, 2015, it debarred four subsidiaries of CGGC in connection with misconduct involving three WB funded projects in China. It debarred Gezhouba No 1 Engineering Co Ltd, Gezhouba No 5 Engineering Co Ltd, Gezhouba No 6 Engineering Co Ltd and their affiliates for a period of 18 months whereas China Gezhouba Three Gorges Engineering Co Ltd and its affiliates debarred for a period of six months. The mother company CGGC also received a letter of reprimand which is valid for six months.
The fact remains that many red signals have been raised in the way interest is being shown by the government to award the Budhi Gandaki project to CGGC. Perhaps more transparency and checks and balances are required before the project is awarded.
(Published on The Himalayan Times, Perspectives, on July 31, 2016)
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