IL&FS set to acquire 15% stake in Nepal’s West Seti project

IL&FS set to acquire 15% stake in Nepal’s West Seti project
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First Published: Wed, Sep 24 2008. 10 42 PM IST
Updated: Wed, Sep 24 2008. 10 42 PM IST
New Delhi: With peace returning to Nepal, SMEC Developments Pty Ltd, which is developing the 750MW West Seti Hydro Project, will soon sell 15% stake in the project to India’s Infrastructure Leasing and Financial Services Ltd, or IL&FS.
“SMEC will offload 15% each to IL&FS, Asian Development Bank (ADB), government of Nepal, China National Machinery and Equipment Import and Export Corp. (CMEC) and 14% to the Nepalese financial institutions,” said Himalaya Pande, director, West Seti Hydro Project, one of the largest hydropower projects being developed in Nepal.
SMEC Developments, a member of Australia’s SMEC Group, which had won survey licence of the project in 1994, couldn’t find co-developers due to internal strife. It had then decided to dilute 74% of its stake in the project when normality returned to the Himalayan country.
Years of politicial instability in Nepal ended when Maoists formed the government on 15 August with Pushpa Kamal Dahal as Prime Minister.
“We have an understanding to take a 15% stake in the project. The shareholder agreement is being finalized. It is purely an investment decision,” said D.K. Mittal, managing director, infrastructure development corporation, IL&FS.
The project is currently valued at $1.6 billion (Rs7,328 crore), with an equity portion of $400 million.
Some 90% of the the power generated from this project will be bought by India’s power trading solutions firm PTC India Ltd for north Indian states.
Nepal has an installed power generation capacity of 617MW, of which around 570MW is generated from hydropower. Although Nepal has 83,000MW of hydropower potential, it is facing a shortage of 100MW, which is expected to increase to around 300MW in the coming winter months.
Demand for power in Nepal is expected to touch 3,000MW by 2025. Tapping some of the country’s hydropower potential could help bridge that gap and also serve as a source of electricity for India.
“West Seti project is a most interesting example of globalization—a project in Nepal being developed by an Australian company with a Chinese EPC (engineering, procurement and construction) contractor for sale of power to India,” said Jairam Ramesh, minister of state for power and commerce, while addressing the Power Summit 2008 on 23 September.
China’s CMEC, an EPC contractor for the project, had used letters of intent promising credit to secure the West Seti contract, as reported by Mint on 24 September.
Nepal has emerged as a favourite destination for several Indian hydroelectric power generation firms. Companies that have plans to set up hydropower projects in that country include Satluj Jal Vidyut Nigam Ltd (402MW Arun-III project) and GMR Infrastructure Ltd (302MW Upper Karnali and the 250MW Upper Myarsangdi projects).
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First Published: Wed, Sep 24 2008. 10 42 PM IST