17 local contractors join to form Bhutan’s first hydropower construction company

A monk watches trucks moving toward the Punatsangchu 1 power project. Now local private players can enter the hydropower construction scene which is now dominated by Indian compaines. (Photo by Reuters)

Druk Green Power Corporation (DGPC)’s  plans to set up a hydropower construction company by October 2010 did not see the light of day but now there is good news for Bhutanese contractors who felt that they were denied a fair share of the hydropower pie. Around 35 contractors jointly decided to form a company to undertake hydropower construction works while the government is still of the notion that Bhutanese contractors are not competent enough to do so.

According to the President Of Construction Association of Bhutan(CAB), Ugen Tshechup, Bhutanese contractors were not given a   chance to work on  hydropower projects as they lacked experience.

The Secretary of   CAB, Cheku Drukpa, said, “It’s the contractors’ own initiative to set up the company; keeping with the government’s goal to build capacity and ability to take up hydropower projects.”

On February 20, 17 out of 35 promoters gathered for a meeting and registered themselves for the company. They intend to complete the registration process by the end of the month. The group is consolidating and integrating to form the company.

To set up the company, the initial investment projected was Nu 30.77 million whereby individuals would make a minimum contribution of 50 units (per head Nu 0.5 million).

Initial investment is mainly for Phase I which includes setting up the company, conducting the feasibility study, constructing roads and bridges and other related surveys.

Phase II includes purchasing equipments and constructing hydropower plants which escalates to a sum of Nu two to four billion.

The member secretary to the interim committee, Gopal Waiba, said the objective behind establishing the company was the attraction it had as a lucrative national revenue generator and an economy building endeavor.

The company will focus on enhancing national engineering capacity and professionalism in hydropower industry, build quality and cost consistency in hydropower industry.

Till date, the government has delayed offering opportunities to  private companies to work on hydropower projects despite repeated requests, said the vice president  for  CAB, Phub Zam.

“The government told Bhutanese contractors that they are not able to give them the work directly, because there is an understanding between the Indian and Bhutanese government thus making it difficult for the government  to  avoid the tendering process,” said Ugen Tshechup.

But, he said, “if we go through the tendering process, we can’t participate since experience is required where we don’t qualify.”

Several requests were put up to the government to involve Bhutanese contractors in the Punatsang chhu II and Mangde chhu project so that they could at least  gain experience.

But after a chronic failure in convincing the  government to allow them to  work the Bhutanese contractors decided to at least work on projects  for which they have the capacity.

“Small projects which constitute of one to 25 megawatt are actually reserved for national firms only,” said Gopal Waiba. He added that the private company is aiming for medium and small projects.

As per the provisions of the sustainable hydropower policy, there are four categories for hydropower projects;  projects above 1,000MW is known as IG model; undertaken by Indian Government and RGoB,joint venture model which produces 1000-150 MW is done by Druk Green Power Corporation (DGPC) and Public Sector Undertaker (PSU) of India.

FDI model is the third category, which takes 150-25 MW. In this model, national firms should hold 26% of equity while the last category takes 25-1 MW projects is purely for national firms.

Leki Dorji Norbu from Bhutan Engineering feels that there is a future in setting up this hydropower construction company, since the resource is abundant and feasible. “We would like to work for both independent power projects and mega projects,” he said.

Till now the government has allowed Indian companies to conduct feasibility surveys. Therefore, the new company is waiting for permission from the government to let them also conduct the pre-feasibility survey of four sites they have targeted.

“As per the renewable energy policy, self identification and feasibility study is not allowed to be conducted  by Bhutanese private individuals but it will be directly done by government,” said Cheku Drukpa.

Therefore, he had put up a proposal to Lyonchen Jigmi Y. Thinley, about the hydropower construction company  conducting feasibility studies.

Lyonchen, he said, gave a positive response since the expense of setting up hydropower projects will be less if the feasibility study is done by the company.

The  CAB member secretary pointed out some of the terms and conditions for the company which they will soon setup.

If the company sees a potential site which has a capacity of above 25 MW then it will have to request the government to allow it to undertake the project under FDI model.

And it will undergo bidding process so as to give equal opportunity to all.

“This company will curb people from investing on depreciating properties; such as buildings and proceed towards ‘saving culture’,” said Gopal Waiba.

He added that in the current scenario, people are more interested in investing in building infrastructure hence the money flow is within the nation. If the hydropower construction company is at work, then  foreign currency  can be earned which is good for the national economy.

The secretary for CAB, in a conference stated that, given the chance, the company which will be set up as soon as registration is over, can take up three projects instantly.

After a long discussion the promoters came up with a name “Bhutan hydro and Infra limited” for the soon-to-be hydropower construction company.

 

 

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