Nepal Electricity Authority (NEA), the state-owned power utility, has initiated the process of terminating the contract with Co-operativa Muratori e Cementisti (CMC) di Ravenna after the Italian firm abandoned the 140-megawatt Tanahu Hydropower Project.

Earlier, the Melamchi Drinking Water Project had also terminated the contract with CMC after representatives of the Italian company left the country without completing the work.

“We had given a 28-day deadline to the Italian company to return to work. But it did not contact us till the deadline on Friday,” said Pradeep Kumar Thike, managing director of the Tanahu Hydropower Project, an undertaking of NEA.

“The termination process has already started,” he said. “We will send the project termination letter to the company soon.”

Thike, however, said that consultation will be held with the Asian Development Bank (ADB) and European Investment Bank (EIB), which are financing the hydropower project, before the contract termination letter is sent to the Italian company. “We have already started holding discussions on this issue with the ADB and the EIB to sort out the matter at the earliest,” Thike said.

Once the contract is terminated with the Italian company, the project will restart the procurement process. The project had hired CMC to divert the flow of the river, build dam and complete head works. CMC was selected as the preferred bidder as it had made the lowest bid of Rs 20.64 billion.

The project has hired Chinese firm, Sinohydro, to build the tunnel and power house of the storage-type project. The Chinese company will also import hydro-mechanical and electromechanical equipment and assemble them. The Chinese firm has agreed to complete all the work at Rs 3.83 billion.

The total cost of the project is estimated at $506 million, of which the Manila-based Asian Development Bank will provide $150 million, Japan International Cooperation Agency will contribute $184 million, European Investment Bank will give $85 million and NEA will chip in $87 million.