Tanahu Hydropower Ltd (THL) — the developer of the Tanahu Hydropower Project — has ‘officially’ terminated the contract with Co-operativa Muratori e Cementisti (CMC) di Ravenna, one of the contractors of the 140-megawatt hydropower project.

THL, a fully-owned subsidiary of Nepal Electricity Authority (NEA), had given a 28-day deadline to the Italian contractor to resume project works on February 19 after CMC earlier abandoned the project. As CMC has not returned to resume the works, THL has terminated the contract with the Italian contractor, informed Pradeep Kumar Thike, managing director of Tanahu Hydropower Project.

Earlier in December, CMC had terminated its contract with the Melamchi Drinking Water Project and Tanahu Hydropower Project citing its bankruptcy. Following this, 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 and failed to resume project works within the given timeframe.

THL had hired CMC to divert the flow of the river, build a dam and complete head works. CMC was selected as the preferred bidder as it had made the lowest bid of Rs 20.64 billion.

Following the termination of the contract with CMC, Tanahu Hydropower Ltd has also claimed the performance guarantee worth Rs 850 million parked by the Italian contractor at Nepal Investment Bank. “The bank has said it will release the performance guarantee parked by CMC to THL by Sunday,” said Thike.

Meanwhile, Tanahu Hydropower Ltd has begun the process of hiring a new contractor for the project.

“We are currently preparing necessary documents for the new tender.

We will publish the tender notice within this month,” informed Thike.

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.

Meanwhile, the construction of the Melamchi Drinking Water Project has been completely halted since CMC terminated the contract in December last year. Though the government had officially terminated the contract with CMC from the project in the first week of February, it has not been able to decide on how to complete the remaining construction works of the water project.

Lately, the Ministry of Water Supply and the Melamchi Water Supply Board seem to be divided over how to take the water project forward.

While the ministry is working to bring back CMC to the project despite terminating the contract, the board is lobbying to start the process to hire a new contractor for the project through a fast-track method and complete the water project as soon as possible.