… KHEL faces shareholding, funding issues
Kholongchhu Hydro Energy Limited (KHEL), the first-ever joint venture hydropower project in Bhutan formed between Druk Green Power Corporation (DGPC) and India’s Satluj Jal Vidyut Nigam (SJVN) is on the verge of shutting down due to disagreement among the shareholders and funding issues.
The shareholder’s agreement for the development of 600 MegaWatt (MW) was signed between DGPC and SJVN on September 30, 2014, by R.P. Singh, Chief Managing Director (CMD) of SJVN and Dasho Chhewang Rinzin, Managing Director (MD) of DGPC on behalf of their respective organizations.
The shareholder agreement was signed before the registration of the joint venture company in Bhutan, where SJVN and DGPC shall have equal holding.
The board and the shareholder have reached out to the two governments; the Government of India and the Royal Government of Bhutan (RGoB) for the final decision.
“We only heard a verbal statement from the KHEL management that the project will be suspended or may be closed but we didn’t receive any official letter as of now,” said one of the site engineers.
The Chairman of KHEL, Ministry of Economic Affairs secretary, Karma Tshering said that they were not able to finalize on debt financing and not able to decide from where to get the loan.
The project was to be financed under a debt-equity ratio of ratio 70:30.
The debt was to be raised on the joint venture companies whereby SJVN was to ensure the raising of loan.
And the project assets were to be mortgaged. The Government of India (GoI) shall provide DGPC’s share of equity in the joint venture company including the ATS of the project as grants.
“If we cannot come to an agreement, we will have to stop the project. We had a board meeting but we couldn’t come to a concrete decision,” said the Chairman.
However, the MD of KHEL said that it is uncertain whether or not the project is going to be shut down as they are still under discussion with the board and shareholders. “Funding is not a problem. there are some issues on the signing of the contract agreements between the shareholders,” said KHEL’s MD.
It has been more than six months and the issues still couldn’t be resolved. “If the agreement has not been signed. There cannot be any work,” he added, also stating, “this is time for the board and the shareholders to advise us, as soon as they make a decision, we can continue with the work,” said the MD.
However, the KHEL MD pointed out that the progress of work is not as anticipated. “Small works are going on, whatever has been awarded,” he added.
Additionally, he said that if the progress is not constant, KHEL may experience issues later. “Early decisions will always be positive for the project,” he said.
On the other hand the Managing Director of Druk Green Power Corporation, Dasho Chhewang Rinzin said that there is no issue with KHEL. “The work is in full swing,” he added.
“All the contractors and workers are carrying out their work, and there’s no way that the project is going to shut down,” he said.
KHEL was registered on June 12, 2015. SJVN (India) and DGPC have been registered under the Companies Act of the Kingdom of Bhutan, 2000 on 12th June 2015.
The contractors are facing construction delays due to issues pertaining to contract agreements.
According to an official of Construction Development Corporation Limited (CDCL), the company has already procured all the materials but works are on hold for the last four to five months now.
A joint venture of a Mumbai based private company, Valecha Engineering Private Limited and Rigsar construction was awarded the contract for the headrace tunnel worth Nu 4.346 B.
Rigsar construction continued carrying out minor works but with not much progress. Due to financial constraints, the company is not able to release staff salaries on time causing inconveniences to hundreds of families.
So far, Nu 4B has been invested in the construction of roads, bridges, and residential areas- accounting for 8 per cent of the total project cost. The surface works have been completed and the contractors are supposed to be carrying out tunnelling work.
Rigsar’s engineer, Sonam Chogyel said, “We couldn’t go as per our work plan due to financial problems. Initially, it was the pandemic and now when everything started opening up, financial issues are affecting our work progress. We’re waiting for a clear directive from the management.”
There are more than 100 national workers and about 10 expatriate workers at the KHEL project currently.
Rigsar construction was awarded the project almost a year ago and the company has procured construction materials worth Nu 300-400 million so far.
However, Rigsar’s joint venture partner Valecha has had no contribution so far. “Valecha remained silent because of the pandemic and they couldn’t come to Bhutan.”
An Intergovernmental (IG) agreement between GoI and RGoB was signed on April 22, 2014, to jointly develop KHEL as well as three other hydroelectric power projects in Bhutan.
KHEL was expected to be completed by November 2025 and generate about 2.5 billion units of electricity annually.