The problem is the the contractor’s liquidity issues
The main contractor of the 118 MW Nikachu project, Hindustan Construction Company’s (HCC) liquidity issues in India is expected to delay the Nikachu project by 6 to 10 months. Liquidity here means the shortage of operating cash from the company.
The project is expected to undergo delays in the Dam, HRT, and powerhouse complexes, leading to many other systematic issues as HCC is constructing all three.
A Druk Green Power Corporation (DGPC) official said that the HCC has been facing acute shortage of funds at the construction site which lead to the delays.
To tide over this problem, the project has stopped paying HCC directly and is now directly paying the suppliers or the sub contractors so that the money is used for the project.
The project has also been trying to help with the cash flow problem with more frequent payments to the sub contractors.
The DGPC official said that the situation is getting back to normal especially over the last two months.
The sub contractors are those who supply labour, steel, cement etc. The HCC management visited the site as well.
HCC has been undergoing some debt restructuring in India due to stressed loans with banks that have hit a number of construction and infrastructure companies in India.
Non receipt of dues in India due to arbitration and delays have also affected HCC in India though the company is slowly coming back to normalcy with more work on its plate.
The Tangsibji Hydro Energy Limited was created as a fully owned subsidiary company of Druk Green in April 2014 to undertake the implementation of the 118 MW Nikachu Hydropower Project, Trongsa, in central Bhutan. The project is estimated to cost Nu. 11.96 billion.
The Nikachu hydropower project is the first project for which DGPC not only prepared the feasibility report but also undertook the DPR preparations. This helped DGPC build its competencies in project investigations, design and engineering, financing and ownership structuring and contracts management.
ADB is taking the lead to arrange the debt financing and it has committed USD 120.5 million for the implementation of the project. INR 2.5 billion and INR 1.03 billion will be loaned from the State Bank of India and EXIM Bank, respectively. A power purchase agreement has been entered into with PTC India Ltd.
The project is also unique in that it aims to be a model project by trying to source as much of the materials and resources within Bhutan.
The project is now expected to be compete sometime in 2020.