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Plans by Druk Green Power Corporation (DGPC) to set up a hydropower construction company by October 2010 ultimately failed to materialize, but now for those Bhutanese contractors who feel they have been deprived of their fair share of the hydropower pie, there is an good news. About 35 contractors have jointly decided to form a company to undertake hydropower construction projects, but the government still believes that the Bhutanese contractors are not capable enough to do so.
Ugen Tshechup, chairman of the Bhutan Construction Association, said that Bhutanese contractors do not have the opportunity to work on hydropower projects due to lack of experience.
CAB Secretary Cheku Drukpa said: “This is a company set up voluntarily by contractors; in line with the government’s goal of building capacity and capacity for hydropower projects.”
On February 20, 17 of the 35 promoters gathered together to register the company. They intend to complete the registration process by the end of this month. The group is integrating and forming a company.
The initial investment to establish a company is estimated to be Nu 30.77 million, of which an individual must contribute at least 50 units (Nu 500,000 per capita).
The initial investment is mainly for the first phase, including establishing the company, conducting feasibility studies, building roads and bridges and other related surveys.
The second phase includes the purchase of equipment and the construction of hydroelectric power stations, costing Nu 24 billion.
Gopal Waiba, member secretary of the interim committee, said the company was set up because of its attractiveness as a lucrative source of national revenue and economic building efforts.
The company will focus on improving the engineering capabilities and professionalism of the national hydropower industry and creating quality and cost consistency in the hydropower industry.
CAB Vice President Phub Zam said the government has so far delayed providing opportunities to private companies to participate in hydropower projects despite repeated requests.
“The government told Bhutanese contractors that they could not directly offer works to them because there was an understanding between the Indian and Bhutanese governments, so it was difficult for the government to avoid the bidding process,” said Ugen Tshechup.
But, he said, “if we go for a tender process, we cannot participate as we are not qualified and experience is required.”
Several requests have been made to the government to get Bhutanese contractors involved in the Punatsang chhu II and Mangde chhu projects so that they can at least gain experience.
But after long failing to convince the government to allow them to work, Bhutanese contractors have decided to at least work on projects for which they are capable.
“Smaller projects of 1 to 25 MW are really reserved only for domestic companies,” Gopal Waiba said. The private company is targeting small and medium-sized projects, he added.
According to the provisions of the Sustainable Hydropower Policy, hydropower projects are divided into four categories: Projects above 1000MW are called IG mode; Joint venture mode to produce 1000-150 MW is undertaken by the Government of India and RGoB and is jointly owned by Druk Green Power Corporation (DGPC) and the Indian public sector Undertaker (PSU) Complete.
The FDI model is the third category and requires 150-25 MW. In this model, state-owned enterprises should hold 26% of the equity, while the last category of projects requiring 25-1 MW is purely state-owned.
Leki Dorji Norbu of the Bhutan Engineering Company believes that setting up this hydropower construction company is promising because the resources are abundant and viable. “We want to work for independent power projects and large projects,” he said.
So far, the government has allowed Indian companies to conduct feasibility studies. The new company is therefore waiting for government permission to conduct pre-feasibility studies on its four selected sites.
“Under the renewable energy policy, self-identification and feasibility studies are not allowed to be conducted privately in Bhutan and must be conducted directly by the government,” said Cheku Drukpa.
Therefore, he proposed to Lyonchen Jigmi Y. Thinley that a hydropower construction company conduct a feasibility study.
Leonchen responded positively because it would cost less to build the hydropower project if the company conducted the feasibility study, he said.
The CAB member secretary pointed out some of the terms and conditions of the company they were about to set up.
If the company sees a potential site with a capacity of more than 25 MW, then it must request the government to allow it to undertake the project under the foreign direct investment model.
And a tender process will be conducted to provide equal opportunities to all.
“This company will discourage people from investing in depreciating properties like buildings and work towards a ‘culture of saving’,” Gopal Vahiba said.
He added that in the current situation, people are more interested in investing in building infrastructure, so the money flows domestically. If hydropower construction companies are working, they can earn foreign exchange, which is good for the national economy.
The CAB secretary said at a meeting that companies established immediately after registration can take up three projects immediately if given the opportunity.
After a long discussion, the initiators named the upcoming hydropower construction company “Bhutan Hydropower and Infrastructure Co., Ltd.”
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